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

The corporate income tax is ultimately paid by all of the following except

A key insight of the public choice model is that public policymakers are likely to pursue the public's interest, even if their self-interests conflict with the public interest.

Suppose the equilibrium price and quantity of a 12-pack of Dr. Pepper are $5.00 and 10,000 12-packs, respectively, and the government decides to impose a $1.00 tax on every 12-pack of carbonated soft drinks. Draw two supply and demand graphs, one showing the excess burden of the tax when supply is less elastic and the other showing the excess burden of the tax when supply is more elastic. Identify the excess burden of the tax on each graph. On which graph is the excess burden the greatest?

The Arrow impossibility theorem

For a given supply curve, the deadweight loss from the imposition of a tax is smaller if demand is more elastic.

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

Suppose, on average, a family in Church Falls earning $60,000 per year paid 6 percent of its income in state taxes. A family earning $80,000 paid, on average, $4,760 in state income taxes. Are state taxes in Church Falls progressive or regressive? Be sure to explain the difference between a progressive tax and a regressive tax.

Consider a public good such as fire protection services. Rich people may benefit more than the poor from such a service because rich people stand to lose more from a fire that destroys property. In this case

The public choice model can be used to examine voting models that contrast the manner in which collective decisions are made by governments (state, local, and federal) and the manner in which individual choices are made in markets. Which of the following descriptions is consistent with the difference between collective decision-making and decision-making in markets?

A marginal tax rate is

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

One result of the public choice model is that most economists believe that

The idea that individuals should be taxed in proportion to the marginal benefits that they receive from public goods is called

If the Gini coefficient for Cartland is 1, it means that income distribution is perfectly equal in this society.

Income inequality in the United States has increased somewhat over the past 25 years. Two factors that appear to have contributed to this are

Which of the following is the largest source of revenue for the U.S. federal government?

Figure 18-1 -Refer to Figure 18-1. Of the tax revenue collected by the government, the portion borne by consumers is represented by the area

As the value of the Gini coefficient approaches one

Suppose the United States has a Gini coefficient of 0.4 and Sweden has a Gini coefficient of 0.25. Which of the following statements is true?

Article Summary State tax revenue from marijuana sales in Colorado have surpassed $500 million since its legalization in January 2014. Colorado has imposed three types of state taxes on marijuana: a 2.9% sales tax on medical marijuana, a 15% special sales tax for recreational use, and a 15% excise tax on wholesale marijuana transfers. About half of the accumulated tax revenue has gone to K-12 education, with over $100 million used to fund school construction projects. Twenty-five percent of the tax is being spent on substance abuse prevention and treatment programs. -Refer to the Article Summary. Colorado taxes marijuana with a 15% sales tax on recreational-use buyers and a 15% wholesale excise tax on producers, which equates to 50 percent of the total taxes paid by retail buyers and 50 percent paid by producers. Does this necessarily mean that buyers and producers will each bear 50 percent of the burden of the tax?