Question 1

Figure 18-4  
-Refer to Figure 18-4. Rank the above panels in terms of most unequal income distribution to least unequal income distribution.

Accepted Answer

A)  Panel A, Panel B, Panel C 
B)  Panel B, Panel C, Panel A 
C)  Panel A, Panel C, Panel B 
D)  Panel C, Panel B, Panel A 
A)  Panel A, Panel B, Panel C 
B)  Panel B, Panel C, Panel A 
C)  Panel A, Panel C, Panel B 
D)  Panel C, Panel B, Panel A

Question 2

If the government is most interested in minimizing excess burden of an excise tax, should it impose the tax on goods whose demand curves are elastic or inelastic?

Accepted Answer

If the government wants to min

Question 3

According to projections for 2017 by the Tax Policy Center, the 20 percent of U.S. taxpayers who make the highest incomes

Accepted Answer

A)  use loopholes and tax exemptions to reduce their share of federal income taxes to less than 20 percent. 
B)  pay about 67 percent of federal income taxes. 
C)  pay about 92 percent of federal income taxes but only about 20 percent of Social Security and Medicare payroll taxes. 
D)  pay more in excise and other taxes than they pay in Social Security and Medicare payroll taxes. 
A)  use loopholes and tax exemptions to reduce their share of federal income taxes to less than 20 percent. 
B)  pay about 67 percent of federal income taxes. 
C)  pay about 92 percent of federal income taxes but only about 20 percent of Social Security and Medicare payroll taxes. 
D)  pay more in excise and other taxes than they pay in Social Security and Medicare payroll taxes.

Question 4

If the government wants to minimize the welfare loss of a tax, it should tax goods with more inelastic demand curves or supply curves.

Accepted Answer

A) True 
 B)False

Question 5

Figure 18-7   Figure 18-7 shows the Lorenz curve for a hypothetical country.
-Refer to Figure 18-7. The second highest 20 percent of households

Accepted Answer

A)  earn 24 percent of the society's total income. 
B)  earn 28 percent of the society's total income. 
C)  earn 42 percent of the society's total income. 
D)  earn 72 percent of the society's total income. 
A)  earn 24 percent of the society's total income. 
B)  earn 28 percent of the society's total income. 
C)  earn 42 percent of the society's total income. 
D)  earn 72 percent of the society's total income.

Question 6

Some economists who use the public choice model to explain the ways government intervenes in the economy believe that regulatory capture results when an agency or commission is given authority over a particular industry or product. Which of the following is the best example of regulatory capture?

Accepted Answer

A)  The Food and Drug Administration (FD
A)  has increased the time and expense pharmaceutical firms incur to receive approval to market a new drug. 
B)  A federal government agency hires more employees than it requires to regulate an industry because it does not seek to minimize costs or maximize the agency's profits. 
C)  The head of an agency is required to testify before Congress because Congress controls the size of the agency's budget. Congress "captures" the agency because of its budget authority. 
D)  Firms that were regulated by the Interstate Commerce Commission (IC
C)  attempted for many years to influence the ICC's actions. 
A)  The Food and Drug Administration (FD
A)  has increased the time and expense pharmaceutical firms incur to receive approval to market a new drug. 
B)  A federal government agency hires more employees than it requires to regulate an industry because it does not seek to minimize costs or maximize the agency's profits. 
C)  The head of an agency is required to testify before Congress because Congress controls the size of the agency's budget. Congress "captures" the agency because of its budget authority. 
D)  Firms that were regulated by the Interstate Commerce Commission (IC
C)  attempted for many years to influence the ICC's actions.

Question 7

Table 18-10
   Table 18-10 shows the income tax brackets and tax rates for single taxpayers in Bauxhall.
-Refer to Table 18-10. A tax exemption is granted for the first $10,000 earned per year. Suppose you earn $75,000.
a. What is the amount of taxes you will pay?
b. What is your average tax rate?
c. What is your marginal tax rate?

Accepted Answer

a. ($6,000 × 0.10) + ($14,000

Question 8

Table 18-1
   Suppose $1 billion is available in the budget and Congress is considering allocating the funds to one of the following three alternatives: 1) Subsidies for education, 2) Research on Alzheimer's or 3) Increased border security. Table 18-1 shows three voters' rankings of the alternatives.
-Refer to Table 18-1. Suppose a series of votes are taken in which each pair of alternatives is considered in turn. If the vote is between allocating funds to education subsidies and increased border security

Accepted Answer

A)  Ivy and Jasmine vote for education subsidies, Rose votes for increased border security, and education subsidies wins. 
B)  Ivy and Rose vote for increased border security, Jasmine votes for education subsidies, and increased border security wins. 
C)  Jasmine and Rose vote for education subsidies, Rose votes for increased border security, and education subsidies wins. 
D)  Jasmine and Ivy vote for increased border security, Rose votes for education subsidies, and increased border security wins. 
A)  Ivy and Jasmine vote for education subsidies, Rose votes for increased border security, and education subsidies wins. 
B)  Ivy and Rose vote for increased border security, Jasmine votes for education subsidies, and increased border security wins. 
C)  Jasmine and Rose vote for education subsidies, Rose votes for increased border security, and education subsidies wins. 
D)  Jasmine and Ivy vote for increased border security, Rose votes for education subsidies, and increased border security wins.

Question 9

The term "payroll taxes" is often used to refer to

Accepted Answer

A)  individual income taxes that are withheld from paychecks. 
B)  corporate income taxes. 
C)  Social Security and Medicare taxes. 
D)  sales taxes. 
A)  individual income taxes that are withheld from paychecks. 
B)  corporate income taxes. 
C)  Social Security and Medicare taxes. 
D)  sales taxes.

Question 10

The public choice model

Accepted Answer

A)  examines the degree of market power that the public exerts in a market economy. 
B)  examines the public's role in appointing politicians and ensuring that elected officials act in ways to reflect the public's preferences. 
C)  applies economic analysis to government decision making. 
D)  applies economic analysis to the collective decision making of consumers. 
A)  examines the degree of market power that the public exerts in a market economy. 
B)  examines the public's role in appointing politicians and ensuring that elected officials act in ways to reflect the public's preferences. 
C)  applies economic analysis to government decision making. 
D)  applies economic analysis to the collective decision making of consumers.

Question 11

According to the median voter theorem, the outcome of a majority vote is likely to represent the preferences of the voter who is in the political middle.

Accepted Answer

A) True 
 B)False

Question 12

When members of Congress vote to pass new legislation, they will

Accepted Answer

A)  always vote for the alternative favored by a majority of the voters. 
B)  fail to consistently represent the underlying preferences of voters. 
C)  always vote for the alternative favored by a plurality of the voters if there is no majority position. 
D)  always fail to represent the underlying preferences of voters. 
A)  always vote for the alternative favored by a majority of the voters. 
B)  fail to consistently represent the underlying preferences of voters. 
C)  always vote for the alternative favored by a plurality of the voters if there is no majority position. 
D)  always fail to represent the underlying preferences of voters.

Question 13

Figure 18-2   Figure 18-2 shows a demand curve and two sets of supply curves, one set more elastic than the other.
-Refer to Figure 18-2. If the government imposes an excise tax of $1.00 on every unit sold, the producer's burden of the tax

Accepted Answer

A)  is Pa - Pd under either supply curve. 
B)  is Pb - Pe under either supply curve. 
C)  is Pa - Pd if the supply curve is S0 and Pb - Pe if the supply curve is S1. 
D)  is Pc - Pd if the supply curve is S0 and Pc - Pe if the supply curve is S1. 
A)  is Pa - Pd under either supply curve. 
B)  is Pb - Pe under either supply curve. 
C)  is Pa - Pd if the supply curve is S0 and Pb - Pe if the supply curve is S1. 
D)  is Pc - Pd if the supply curve is S0 and Pc - Pe if the supply curve is S1.

Question 14

If official poverty statistics for the United States included transfer payments individuals receive from the government, such as Social Security payments and other non-cash benefits such as food stamps

Accepted Answer

A)  the poverty rate would be lower. 
B)  poverty would be eliminated. 
C)  income inequality would be greater. 
D)  the poverty rate would be overstated. 
A)  the poverty rate would be lower. 
B)  poverty would be eliminated. 
C)  income inequality would be greater. 
D)  the poverty rate would be overstated.

Question 15

The Arrow impossibility theorem states that

Accepted Answer

A)  no system of voting can be devised that will always consistently represent the underlying preferences of voters. 
B)  it is impossible for a majority voting system not to consistently represent the preferences of voters. 
C)  it is impossible to separate corporate desires from public bureaucracy. 
D)  no system of voting can be devised that will ensure a 100 percent voter turnout. 
A)  no system of voting can be devised that will always consistently represent the underlying preferences of voters. 
B)  it is impossible for a majority voting system not to consistently represent the preferences of voters. 
C)  it is impossible to separate corporate desires from public bureaucracy. 
D)  no system of voting can be devised that will ensure a 100 percent voter turnout.

Question 16

A study by the Congressional Budget Office (CBO) regarding the corporate income tax included the following statement: "A corporation may write its check to the Internal Revenue Service for payment of the corporate income tax, but the money must come from somewhere..." The comments that followed this statement argued that

Accepted Answer

A)  corporations pass on some of the burden of the tax to investors in the company, to workers, and to consumers. 
B)  the corporate income tax is a reliable source of revenue because corporations cannot avoid paying the tax. 
C)  it is necessary to retain the tax because it is based on the ability-to-pay principle. 
D)  the tax is more progressive than the individual income tax. 
A)  corporations pass on some of the burden of the tax to investors in the company, to workers, and to consumers. 
B)  the corporate income tax is a reliable source of revenue because corporations cannot avoid paying the tax. 
C)  it is necessary to retain the tax because it is based on the ability-to-pay principle. 
D)  the tax is more progressive than the individual income tax.

Question 17

All Gini coefficients must lie between 0 and 1. The lower the value,

Accepted Answer

A)  the more unequal the income distribution. 
B)  the closer the income distribution is to being equal. 
C)  the greater the degree of poverty. 
D)  the lower the degree of poverty according to the federal government's definition of poverty. 
A)  the more unequal the income distribution. 
B)  the closer the income distribution is to being equal. 
C)  the greater the degree of poverty. 
D)  the lower the degree of poverty according to the federal government's definition of poverty.

Question 18

What is meant by "tax incidence"?

Accepted Answer

Tax incidence refers to the ac

Question 19

Why is a typical person likely to gather more information when buying a new car than when voting for a member of Congress?

Accepted Answer

A)  because a person's preferences are more likely to be met with little effort in the political sphere but this is not the case when buying a car in the private marketplace 
B)  because it is less costly to acquire information about consumer items than it is about political candidates 
C)  because buying a new car affects a person more immediately and personally compared to voting for a member of Congress; in the latter, a person's vote is only one of many voters and therefore, not likely to have a large impact on the outcome 
D)  because the effects of buying a car are long term while a member of Congress has a relatively short tenure 
A)  because a person's preferences are more likely to be met with little effort in the political sphere but this is not the case when buying a car in the private marketplace 
B)  because it is less costly to acquire information about consumer items than it is about political candidates 
C)  because buying a new car affects a person more immediately and personally compared to voting for a member of Congress; in the latter, a person's vote is only one of many voters and therefore, not likely to have a large impact on the outcome 
D)  because the effects of buying a car are long term while a member of Congress has a relatively short tenure

Question 20

If you pay $14,000 in taxes on an income of $125,000, and $17,400 in taxes on an income of $144,000, what is your marginal tax rate? Show your work.

Accepted Answer

Marginal tax rate =

Exam 18: Public Choice, Taxes, and the Distribution of Income

Figure 18-4 -Refer to Figure 18-4. Rank the above panels in terms of most unequal income distribution to least unequal income distribution.

If the government is most interested in minimizing excess burden of an excise tax, should it impose the tax on goods whose demand curves are elastic or inelastic?

According to projections for 2017 by the Tax Policy Center, the 20 percent of U.S. taxpayers who make the highest incomes

If the government wants to minimize the welfare loss of a tax, it should tax goods with more inelastic demand curves or supply curves.

Figure 18-7 Figure 18-7 shows the Lorenz curve for a hypothetical country. -Refer to Figure 18-7. The second highest 20 percent of households

Some economists who use the public choice model to explain the ways government intervenes in the economy believe that regulatory capture results when an agency or commission is given authority over a particular industry or product. Which of the following is the best example of regulatory capture?

The term "payroll taxes" is often used to refer to

The public choice model

According to the median voter theorem, the outcome of a majority vote is likely to represent the preferences of the voter who is in the political middle.

When members of Congress vote to pass new legislation, they will

Figure 18-2 Figure 18-2 shows a demand curve and two sets of supply curves, one set more elastic than the other. -Refer to Figure 18-2. If the government imposes an excise tax of $1.00 on every unit sold, the producer's burden of the tax

If official poverty statistics for the United States included transfer payments individuals receive from the government, such as Social Security payments and other non-cash benefits such as food stamps

The Arrow impossibility theorem states that

All Gini coefficients must lie between 0 and 1. The lower the value,

What is meant by "tax incidence"?

Why is a typical person likely to gather more information when buying a new car than when voting for a member of Congress?

If you pay $14,000 in taxes on an income of $125,000, and $17,400 in taxes on an income of $144,000, what is your marginal tax rate? Show your work.

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters