Question 1

What is the relationship between market failure and government failure?

Accepted Answer

Market failure is a case where the marke

Question 2

A Gini coefficient of ________ means that an income distribution is perfectly equal and a Gini coefficient of ________ means the income distribution is perfectly unequal.

Accepted Answer

A)  0; 1 
B)  1; 0 
C)  0; 100 
D)  100; 0 
A)  0; 1 
B)  1; 0 
C)  0; 100 
D)  100; 0

Question 3

According to the benefits-received principle of taxation

Accepted Answer

A)  individuals who receive the benefits from a government program should pay the taxes that support the program. 
B)  because high-income individuals receive the most benefits from government programs, they should pay more taxes than lower-income individuals. 
C)  people in the same economic situation should bear an equal share of the tax burden. 
D)  the benefits of government programs such as national defense are shared equally by all people; therefore, the burden of paying for these programs should be shared equally. 
A)  individuals who receive the benefits from a government program should pay the taxes that support the program. 
B)  because high-income individuals receive the most benefits from government programs, they should pay more taxes than lower-income individuals. 
C)  people in the same economic situation should bear an equal share of the tax burden. 
D)  the benefits of government programs such as national defense are shared equally by all people; therefore, the burden of paying for these programs should be shared equally.

Question 4

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

Accepted Answer

A)  earn 12 percent of the society's total income. 
B)  earn 16 percent of the society's total income. 
C)  earn 28 percent of the society's total income. 
D)  earn 40 percent of the society's total income. 
A)  earn 12 percent of the society's total income. 
B)  earn 16 percent of the society's total income. 
C)  earn 28 percent of the society's total income. 
D)  earn 40 percent of the society's total income.

Question 5

Income inequality increases as the Gini coefficient approaches 1.

Accepted Answer

A) True 
 B)False

Question 6

Congressman Flack votes for a program that will benefit the constituents of Congressman Walpole. The public choice model suggests that Flack's vote is best explained by which of the following?

Accepted Answer

A)  rational ignorance 
B)  party loyalty 
C)  logrolling 
D)  the voting paradox 
A)  rational ignorance 
B)  party loyalty 
C)  logrolling 
D)  the voting paradox

Question 7

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

Accepted Answer

A)  B + C. 
B)  F + G. 
C)  E + H. 
D)  B + C + F + G. 
A)  B + C. 
B)  F + G. 
C)  E + H. 
D)  B + C + F + G.

Question 8

The largest percentage of federal income tax revenue in the United States is paid by the

Accepted Answer

A)  lowest income taxpayers. 
B)  middle income taxpayers. 
C)  highest income taxpayers. 
D)  All groups of taxpayers-low income, high income and middle income-pay the same percent of federal income taxes. 
A)  lowest income taxpayers. 
B)  middle income taxpayers. 
C)  highest income taxpayers. 
D)  All groups of taxpayers-low income, high income and middle income-pay the same percent of federal income taxes.

Question 9

The median voter theorem states that the outcome of a majority vote

Accepted Answer

A)  tends to favor the preferences of high-income individuals and ignore the median voter. 
B)  is likely to represent the preferences of society's middle-income voter. 
C)  is likely to represent the preferences of the voter who is in the political middle. 
D)  is determined by the average consumer and producer in an economy. 
A)  tends to favor the preferences of high-income individuals and ignore the median voter. 
B)  is likely to represent the preferences of society's middle-income voter. 
C)  is likely to represent the preferences of the voter who is in the political middle. 
D)  is determined by the average consumer and producer in an economy.

Question 10

Which of the following groups had the highest poverty rate in 2016 in the United States?

Accepted Answer

A)  Asians 
B)  blacks 
C)  Hispanics 
D)  female heads of families 
A)  Asians 
B)  blacks 
C)  Hispanics 
D)  female heads of families

Question 11

Figure 18-5   Figure 18-5 shows the Lorenz curve for a hypothetical country.
-Refer to Figure 18-5. The 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 12

As a group, people with high incomes are likely to have

Accepted Answer

A)  greater-than-average family inheritances and greater than average SAT scores. 
B)  greater-than-average holdings of stocks and bonds and lower-than-average productivity. 
C)  greater-than-average productivity and greater-than-average amounts of capital. 
D)  a stable marriage and no children. 
A)  greater-than-average family inheritances and greater than average SAT scores. 
B)  greater-than-average holdings of stocks and bonds and lower-than-average productivity. 
C)  greater-than-average productivity and greater-than-average amounts of capital. 
D)  a stable marriage and no children.

Question 13

Logrolling may result in

Accepted Answer

A)  legislation that yields economy-wide benefits, the funding for which is borne primarily by a few of the smallest states. 
B)  a majority of Congress supporting legislation that benefits the economic interests of a few, while harming the economic interests of a much larger group. 
C)  members of Congress selling their votes on proposed legislation to the highest bidder. 
D)  creating limited incentives for policymakers to consider the immediate consequences of their proposed legislation. 
A)  legislation that yields economy-wide benefits, the funding for which is borne primarily by a few of the smallest states. 
B)  a majority of Congress supporting legislation that benefits the economic interests of a few, while harming the economic interests of a much larger group. 
C)  members of Congress selling their votes on proposed legislation to the highest bidder. 
D)  creating limited incentives for policymakers to consider the immediate consequences of their proposed legislation.

Question 14

Figure 18-5   Figure 18-5 shows the Lorenz curve for a hypothetical country.
-Refer to Figure 18-5. The middle 20 percent of households

Accepted Answer

A)  earn 20 percent of the society's total income. 
B)  earn 36 percent of the society's total income. 
C)  earn 48 percent of the society's total income. 
D)  earn 50 percent of the society's total income. 
A)  earn 20 percent of the society's total income. 
B)  earn 36 percent of the society's total income. 
C)  earn 48 percent of the society's total income. 
D)  earn 50 percent of the society's total income.

Question 15

When considering changes in tax policy, economists usually focus on

Accepted Answer

A)  the average tax rate. 
B)  the marginal tax rate. 
C)  people's willingness to pay taxes. 
D)  people's ability to pay taxes. 
A)  the average tax rate. 
B)  the marginal tax rate. 
C)  people's willingness to pay taxes. 
D)  people's ability to pay taxes.

Question 16

Economists James Buchanan and Gordon Tullock are well-known for developing

Accepted Answer

A)  the impossibility theorem. 
B)  the voting paradox. 
C)  the public choice model. 
D)  the concept of government failure. 
A)  the impossibility theorem. 
B)  the voting paradox. 
C)  the public choice model. 
D)  the concept of government failure.

Question 17

When the demand for a product is more elastic than the supply

Accepted Answer

A)  consumers pay the majority of the tax on the product. 
B)  consumers pay the entire tax on the product. 
C)  firms pay the majority of the tax on the product. 
D)  firms pay the entire tax on the product. 
A)  consumers pay the majority of the tax on the product. 
B)  consumers pay the entire tax on the product. 
C)  firms pay the majority of the tax on the product. 
D)  firms pay the entire tax on the product.

Question 18

Rent-seeking behavior, unlike profit-maximizing behavior in competitive markets, wastes society's scarce resources.

Accepted Answer

A) True 
 B)False

Question 19

Figure 18-6   Figure 18-6 shows the Lorenz curves for Islandia and Syldavia.
-Refer to Figure 18-6. If area X = 2,060, area Y = 240, and area Z= 2,700, calculate the Gini coefficient for Syldavia.

Accepted Answer

A)  0.05 
B)  0.12 
C)  0.46 
D)  0.85 
A)  0.05 
B)  0.12 
C)  0.46 
D)  0.85

Question 20

What is the difference between the voting paradox and the Arrow impossibility theorem?

Accepted Answer

The voting paradox is the failure of maj

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

What is the relationship between market failure and government failure?

A Gini coefficient of ________ means that an income distribution is perfectly equal and a Gini coefficient of ________ means the income distribution is perfectly unequal.

According to the benefits-received principle of taxation

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

Income inequality increases as the Gini coefficient approaches 1.

Congressman Flack votes for a program that will benefit the constituents of Congressman Walpole. The public choice model suggests that Flack's vote is best explained by which of the following?

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

The largest percentage of federal income tax revenue in the United States is paid by the

The median voter theorem states that the outcome of a majority vote

Which of the following groups had the highest poverty rate in 2016 in the United States?

Figure 18-5 Figure 18-5 shows the Lorenz curve for a hypothetical country. -Refer to Figure 18-5. The highest 20 percent of households

As a group, people with high incomes are likely to have

Logrolling may result in

Figure 18-5 Figure 18-5 shows the Lorenz curve for a hypothetical country. -Refer to Figure 18-5. The middle 20 percent of households

When considering changes in tax policy, economists usually focus on

Economists James Buchanan and Gordon Tullock are well-known for developing

When the demand for a product is more elastic than the supply

Rent-seeking behavior, unlike profit-maximizing behavior in competitive markets, wastes society's scarce resources.

Figure 18-6 Figure 18-6 shows the Lorenz curves for Islandia and Syldavia. -Refer to Figure 18-6. If area X = 2,060, area Y = 240, and area Z= 2,700, calculate the Gini coefficient for Syldavia.

What is the difference between the voting paradox and the Arrow impossibility theorem?

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 Gini coefficient of means that an income distribution is perfectly equal and a Gini coefficient of means the income distribution is perfectly unequal.