Question 1

If your income is $40,000 and you pay taxes of $4,650, what is your average tax rate? Show your work.

Accepted Answer

Average tax rate = $

Question 2

Table 18-7
   Table 18-7 shows the amount of taxes paid on various levels of income.
-Refer to Table 18-7. The tax system is

Accepted Answer

A)  progressive throughout all levels of income. 
B)  proportional throughout all levels of income. 
C)  regressive throughout all levels of income. 
D)  progressive between $10,000 and $12,000 of income and regressive between $16,000 and $22,000. 
A)  progressive throughout all levels of income. 
B)  proportional throughout all levels of income. 
C)  regressive throughout all levels of income. 
D)  progressive between $10,000 and $12,000 of income and regressive between $16,000 and $22,000.

Question 3

Table 18-2
  
-Refer to Table 18-2. The table above lists three policy alternatives that the U.S. Senate will vote on, along with the ranking of these alternates. The Senate must decide which of these alternatives should receive an additional $1 billion of funding, and there is enough money in the federal budget for only one of these alternatives. If a series of votes is taken in which each pair of alternatives is considered (homeland security and education; homeland security and medical research; education and medical research) which of the following will result from these votes?

Accepted Answer

A)  When the vote is between homeland security and education, the Senators will vote for education to receive funding. 
B)  The Senators' votes will demonstrate transitivity. 
C)  The results will illustrate the voting paradox. 
D)  The results from the voting will illustrate the median voter theorem. 
A)  When the vote is between homeland security and education, the Senators will vote for education to receive funding. 
B)  The Senators' votes will demonstrate transitivity. 
C)  The results will illustrate the voting paradox. 
D)  The results from the voting will illustrate the median voter theorem.

Question 4

The Gini coefficient for the United States in 1980 was 0.403. In 2016, the coefficient was equal to 0.481. This means that

Accepted Answer

A)  per capita income in the United States rose from 1980 to 2016. 
B)  there was a decrease in the amount of government transfer payments from 1980 to 2016. 
C)  cuts in federal income tax rates in the early 1980s and 2001 helped to reduce income inequality. 
D)  income inequality increased from 1980 to 2016. 
A)  per capita income in the United States rose from 1980 to 2016. 
B)  there was a decrease in the amount of government transfer payments from 1980 to 2016. 
C)  cuts in federal income tax rates in the early 1980s and 2001 helped to reduce income inequality. 
D)  income inequality increased from 1980 to 2016.

Question 5

A situation where a member of Congress votes to approve a bill in exchange for favorable votes from other members on other bills is called

Accepted Answer

A)  rent seeking. 
B)  logrolling. 
C)  regulatory capture. 
D)  special interest legislation. 
A)  rent seeking. 
B)  logrolling. 
C)  regulatory capture. 
D)  special interest legislation.

Question 6

Figure 18-6   Figure 18-6 shows the Lorenz curves for Islandia and Syldavia.
-Refer to Figure 18-6. Which country has the more unequal distribution of income?

Accepted Answer

A)  Islandia 
B)  Syldavia 
C)  They may have the same absolute income distribution although their relative income distribution is different. 
D)  There is insufficient information to answer the question. 
A)  Islandia 
B)  Syldavia 
C)  They may have the same absolute income distribution although their relative income distribution is different. 
D)  There is insufficient information to answer the question.

Question 7

A regressive tax is a tax for which people with lower incomes

Accepted Answer

A)  pay a lower percentage of their incomes in tax than do people with higher incomes. 
B)  pay a higher percentage of their incomes in tax than do people with higher incomes. 
C)  pay the same percentage of their incomes in tax as do people with higher incomes. 
D)  do not have to pay unless their incomes exceeds a certain amount. 
A)  pay a lower percentage of their incomes in tax than do people with higher incomes. 
B)  pay a higher percentage of their incomes in tax than do people with higher incomes. 
C)  pay the same percentage of their incomes in tax as do people with higher incomes. 
D)  do not have to pay unless their incomes exceeds a certain amount.

Question 8

Economists caution that conventional statistics used to estimate the extent of poverty in the United States fail to account for benefits people receive that, if considered, would reduce the amount of poverty. Which of the following is an example of these benefits?

Accepted Answer

A)  State and local sales taxes are regressive. As a result, the poor have lower after-tax incomes than they would have if these taxes were proportional or progressive. 
B)  The federal income tax system is progressive. As a result, the poor have higher after-tax incomes than they would have if the income tax system was proportional or regressive. 
C)  Individuals with low incomes receive non-cash benefits such as free school lunches and food stamps. 
D)  The federal minimum wage forces employers to pay workers with low skills an efficiency wage. 
A)  State and local sales taxes are regressive. As a result, the poor have lower after-tax incomes than they would have if these taxes were proportional or progressive. 
B)  The federal income tax system is progressive. As a result, the poor have higher after-tax incomes than they would have if the income tax system was proportional or regressive. 
C)  Individuals with low incomes receive non-cash benefits such as free school lunches and food stamps. 
D)  The federal minimum wage forces employers to pay workers with low skills an efficiency wage.

Question 9

A CBO study estimated that the excess burden from the corporate income tax ________ of the revenues raised by the tax. This estimate would make the corporate income tax ________ imposed by the federal government.

Accepted Answer

A)  could equal more than half; one of the most inefficient taxes 
B)  equals less than 10 percent; one of the most efficient taxes 
C)  equals less than 3 percent; the most efficient tax 
D)  equals more than 90 percent; the most inefficient tax 
A)  could equal more than half; one of the most inefficient taxes 
B)  equals less than 10 percent; one of the most efficient taxes 
C)  equals less than 3 percent; the most efficient tax 
D)  equals more than 90 percent; the most inefficient tax

Question 10

A marginal tax rate is calculated as

Accepted Answer

A)  total taxable income ÷ by taxes paid. 
B)  taxes paid ÷ total taxable income. 
C)  change in taxes paid ÷ the change in total taxable income. 
D)  change in taxable income ÷ change in taxes paid. 
A)  total taxable income ÷ by taxes paid. 
B)  taxes paid ÷ total taxable income. 
C)  change in taxes paid ÷ the change in total taxable income. 
D)  change in taxable income ÷ change in taxes paid.

Question 11

Employees ________ income tax on their wages and salaries, and ________ income tax on the amount employers spend providing them with health insurance.

Accepted Answer

A)  do not pay; do not pay 
B)  pay; pay 
C)  pay; do not pay 
D)  do not pay; pay 
A)  do not pay; do not pay 
B)  pay; pay 
C)  pay; do not pay 
D)  do not pay; pay

Question 12

If you pay $3,000 in taxes on an income of $28,000, and $4,450 in taxes on an income of $38,000, what is your marginal tax rate? Show your work.

Accepted Answer

Marginal tax rate =

Question 13

An income tax system is ________ if marginal tax rates increase as income increases.

Accepted Answer

A)  progressive 
B)  regressive 
C)  efficient 
D)  equitable 
A)  progressive 
B)  regressive 
C)  efficient 
D)  equitable

Question 14

The marginal tax rate is

Accepted Answer

A)  the amount of taxes paid as a percentage of income. 
B)  the amount of per-capita taxes paid. 
C)  the amount of taxes paid as a percentage of gross domestic product (GDP). 
D)  the fraction of each additional dollar of income that must be paid in taxes. 
A)  the amount of taxes paid as a percentage of income. 
B)  the amount of per-capita taxes paid. 
C)  the amount of taxes paid as a percentage of gross domestic product (GDP). 
D)  the fraction of each additional dollar of income that must be paid in taxes.

Question 15

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 consumer's burden of the tax

Accepted Answer

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

Question 16

Of the following sources of tax revenue for state and local governments, which was the smallest in 2016?

Accepted Answer

A)  sales taxes. 
B)  the corporate income tax. 
C)  the property tax. 
D)  the individual income tax. 
A)  sales taxes. 
B)  the corporate income tax. 
C)  the property tax. 
D)  the individual income tax.

Question 17

Congressman Gallstone seeks support from his colleagues for a bill he sponsors that will establish a new national park in his district. He offers to support Congresswoman Disrail's proposal to build a new library in her district in exchange for her vote for his national park bill. This is an example of

Accepted Answer

A)  regulatory capture. 
B)  logrolling. 
C)  rational ignorance. 
D)  government failure. 
A)  regulatory capture. 
B)  logrolling. 
C)  rational ignorance. 
D)  government failure.

Question 18

For the top 1 percent of income distribution, the share of total income earned by households in this group was about ________ percent in 2016.

Accepted Answer

A)  9 
B)  19 
C)  44 
D)  68 
A)  9 
B)  19 
C)  44 
D)  68

Question 19

"For a given supply curve, the excess burden of a tax will be greater when the demand for a product is less elastic than when the demand is more elastic." This statement is

Accepted Answer

A)  correct. 
B)  incorrect because the incidence of the tax, not the burden of the tax, is affected by the elasticity of demand. 
C)  incorrect. When demand is less elastic, the burden of the tax is smaller than when the demand is more elastic. 
D)  incorrect. The statement confuses demand with quantity demanded. 
A)  correct. 
B)  incorrect because the incidence of the tax, not the burden of the tax, is affected by the elasticity of demand. 
C)  incorrect. When demand is less elastic, the burden of the tax is smaller than when the demand is more elastic. 
D)  incorrect. The statement confuses demand with quantity demanded.

Question 20

If you pay $2,000 in taxes on an income of $20,000, and a tax of $3,500 on an income of $30,000, then over this range of income the tax is

Accepted Answer

A)  regressive. 
B)  proportional. 
C)  progressive. 
D)  There is insufficient information to answer the question. 
A)  regressive. 
B)  proportional. 
C)  progressive. 
D)  There is insufficient information to answer the question.

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

If your income is $40,000 and you pay taxes of $4,650, what is your average tax rate? Show your work.

Table 18-7 Table 18-7 shows the amount of taxes paid on various levels of income. -Refer to Table 18-7. The tax system is

The Gini coefficient for the United States in 1980 was 0.403. In 2016, the coefficient was equal to 0.481. This means that

A situation where a member of Congress votes to approve a bill in exchange for favorable votes from other members on other bills is called

Figure 18-6 Figure 18-6 shows the Lorenz curves for Islandia and Syldavia. -Refer to Figure 18-6. Which country has the more unequal distribution of income?

A regressive tax is a tax for which people with lower incomes

Economists caution that conventional statistics used to estimate the extent of poverty in the United States fail to account for benefits people receive that, if considered, would reduce the amount of poverty. Which of the following is an example of these benefits?

A CBO study estimated that the excess burden from the corporate income tax ________ of the revenues raised by the tax. This estimate would make the corporate income tax ________ imposed by the federal government.

A marginal tax rate is calculated as

Employees ________ income tax on their wages and salaries, and ________ income tax on the amount employers spend providing them with health insurance.

If you pay $3,000 in taxes on an income of $28,000, and $4,450 in taxes on an income of $38,000, what is your marginal tax rate? Show your work.

An income tax system is ________ if marginal tax rates increase as income increases.

The marginal tax rate is

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 consumer's burden of the tax

Of the following sources of tax revenue for state and local governments, which was the smallest in 2016?

For the top 1 percent of income distribution, the share of total income earned by households in this group was about ________ percent in 2016.

"For a given supply curve, the excess burden of a tax will be greater when the demand for a product is less elastic than when the demand is more elastic." This statement is

If you pay $2,000 in taxes on an income of $20,000, and a tax of $3,500 on an income of $30,000, then over this range of income the tax is

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

A CBO study estimated that the excess burden from the corporate income tax of the revenues raised by the tax. This estimate would make the corporate income tax imposed by the federal government.

Employees income tax on their wages and salaries, and income tax on the amount employers spend providing them with health insurance.