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

Figure 18-3 -Refer to Figure 18-3. The figure above shows a demand curve and two supply curves, one more elastic than the other. Use Figure 18-3 to answer the following questions. a. Suppose the government imposes an excise tax of $1.00 on every unit sold. Use the graph to illustrate the impact of this tax when the supply curve is S₁ and when the supply curve is S₂. b. If the government imposes an excise tax of $1.00 on every unit sold, will the consumer pay more of the tax if the supply curve is S₁ or S₂? Refer to the graphs in your answer. c. If an excise tax of $1.00 on every unit sold is imposed, will the revenue collected by the government be greater if the supply curve is S₁ or S₂? d. If the government imposes an excise tax of $1.00 on every unit sold, will the deadweight loss be greater if the supply curve is S₁ or S₂?

Holding all other factors constant, income earned from capital is more unequally distributed than income earned from labor.

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 government's revenue from the tax

A tax is efficient if

The government of Silverado raises revenue to operate the city's hospital, open to all residents, through a general income tax paid by its residents. This method of raising revenue is consistent with the benefits-received principle, even if some residents use the hospital more than others.

What is logrolling?

Absolute poverty measures vary from country to country. For example, in 2017, the poverty line in the United States for a family of four was an annual income of $24,600 but economists often use a much lower threshold income of $1.25 per day when calculating the rate of poverty in poor countries. Using this $1.25-per-day measure of the poverty line, which of the following regions had the largest percentage decrease in the percentage of the population in poverty from 1970 to 2010?

The average tax rate is calculated as

Explain the effect of price elasticities of supply and demand on tax incidence.

Figure 18-1 -Refer to Figure 18-1. Area F + G represents

What is rent seeking and how is it related to regulatory capture?

The voting paradox suggests that the "voting market," as represented by elections

How would the elimination of a sales tax affect the market for a product that had been subject to the tax?

A tax imposed by a state or local government on retail sales of most products is

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 Islandia.

The complexity of the U.S. federal income tax system results in significant annual deadweight losses. The opportunity cost of the hours taxpayers spend on record keeping and completing their tax returns amounts to billions of dollars. a. If the tax system was simplified, how would this benefit the economy? b. Why hasn't the tax system been simplified?

The government of Silverado raises revenue through a general income tax paid by all its residents to operate the city's marina. The marina is used by private boat owners. This method of raising revenue to operate the marina is

During the past 30 years, income inequality in the United States has increased in part due to rapid technological change. How does technological change contribute to income inequality?

Many state governments use lotteries to raise revenue. If a lottery is viewed as a tax, is it most likely a progressive tax or a regressive tax? What information would you need to determine whether the burden of a lottery is progressive or regressive?

Horizontal equity means that two people in identical economic situations should pay the same amount of taxes.