Question 1

What does a Lorenz curve illustrate?

Accepted Answer

A)  a comparison of the distribution of income in two different countries 
B)  the distribution of income within a country in a given time period 
C)  the share of taxes paid by different groups of households 
D)  the change over time in the percentage of households with incomes that place them below the poverty line 
A)  a comparison of the distribution of income in two different countries 
B)  the distribution of income within a country in a given time period 
C)  the share of taxes paid by different groups of households 
D)  the change over time in the percentage of households with incomes that place them below the poverty line B

Question 2

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

Accepted Answer

A) True 
 B)False  True

Question 3

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. C

Question 4

-Refer to Figure 16-1. The sales tax revenue collected by the government 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 5

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

Accepted Answer

A)  owners of the corporation. 
B)  the corporation's debtors in the form of lower rates of return on the corporation's bonds. 
C)  customers in the form of higher prices. 
D)  employees in the form of lower wages. 
A)  owners of the corporation. 
B)  the corporation's debtors in the form of lower rates of return on the corporation's bonds. 
C)  customers in the form of higher prices. 
D)  employees in the form of lower wages.

Question 6

The federal government and some state governments levy taxes on specific goods such as petrol, cigarettes and beer. These are known as

Accepted Answer

A)  sales taxes. 
B)  sin taxes. 
C)  specific taxes. 
D)  excise taxes. 
A)  sales taxes. 
B)  sin taxes. 
C)  specific taxes. 
D)  excise taxes.

Question 7

What is the difference between the poverty line and the poverty rate?

Accepted Answer

The poverty line is the level of annual

Question 8

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 9

For a given supply curve, how does the elasticity of demand affect the burden of a tax imposed on a product?

Accepted Answer

A)  The excess burden of the tax will be minimised when the demand is unit-elastic. 
B)  The excess burden of the tax will be greater when the elasticity of supply is greater than the elasticity of demand. 
C)  The excess burden of the tax will be greater when the demand is less elastic than when it is more elastic. 
D)  The excess burden of the tax will be greater when the demand is more elastic than when it is less elastic. 
A)  The excess burden of the tax will be minimised when the demand is unit-elastic. 
B)  The excess burden of the tax will be greater when the elasticity of supply is greater than the elasticity of demand. 
C)  The excess burden of the tax will be greater when the demand is less elastic than when it is more elastic. 
D)  The excess burden of the tax will be greater when the demand is more elastic than when it is less elastic.

Question 10

-Refer to Figure 16-2. If the government imposes an excise tax of $1.00 on every unit sold, what is the size of the deadweight loss, if there is any?

Accepted Answer

A)  the area adc if the supply curve is S0 and the area bec if the supply curve is S1 
B)  the area afcd if the supply curve is S0 and the area bfce if the supply curve is S1 
C)  the area becf under either supply curve 
D)  There is no deadweight loss; revenue raised is used to fund government projects. 
A)  the area adc if the supply curve is S0 and the area bec if the supply curve is S1 
B)  the area afcd if the supply curve is S0 and the area bfce if the supply curve is S1 
C)  the area becf under either supply curve 
D)  There is no deadweight loss; revenue raised is used to fund government projects.

Question 11

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 12

If you pay $2000 in taxes on an income of $20 000, and a tax of $3500 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.

Question 13

Economists argue that the corporate income tax is an example of a tax with a high deadweight loss because

Accepted Answer

A)  some of the burden of the tax is passed on to consumers in the form of higher prices. 
B)  it discourages corporations from undertaking capital investments to enhance market competitiveness. 
C)  taxing a corporation's income amounts to double taxing the earnings on individual shareholders' investments in corporations. 
D)  it encourages corporations to seek ways to evade taxes. 
A)  some of the burden of the tax is passed on to consumers in the form of higher prices. 
B)  it discourages corporations from undertaking capital investments to enhance market competitiveness. 
C)  taxing a corporation's income amounts to double taxing the earnings on individual shareholders' investments in corporations. 
D)  it encourages corporations to seek ways to evade taxes.

Question 14

As the value of the Gini coefficient approaches zero,

Accepted Answer

A)  income distribution becomes less unequal. 
B)  income distribution becomes more unequal. 
C)  the percentage of the population under the poverty line increases. 
D)  the percentage of the population under the poverty line decreases. 
A)  income distribution becomes less unequal. 
B)  income distribution becomes more unequal. 
C)  the percentage of the population under the poverty line increases. 
D)  the percentage of the population under the poverty line decreases.

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

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 17

-Refer to Figure 16-2. 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 18

The term tax incidence refers to

Accepted Answer

A)  the degree of progression of a tax. 
B)  the actual division of the burden of a tax between buyers and sellers in a market. 
C)  the amount of revenue government collects from a tax imposed on a good or service. 
D)  whether the burden of a tax rests more heavily on those with higher incomes or those with lower incomes. 
A)  the degree of progression of a tax. 
B)  the actual division of the burden of a tax between buyers and sellers in a market. 
C)  the amount of revenue government collects from a tax imposed on a good or service. 
D)  whether the burden of a tax rests more heavily on those with higher incomes or those with lower incomes.

Question 19

The actual division of the burden of a tax is called

Accepted Answer

A)  tax credit. 
B)  tax incidence. 
C)  excess burden. 
D)  tax dispersion. 
A)  tax credit. 
B)  tax incidence. 
C)  excess burden. 
D)  tax dispersion.

Question 20

What is the poverty rate?

Accepted Answer

A)  the rate at which the number of people relative to the size of the population fall below the poverty line 
B)  the percentage of the population earning an annual income below the poverty line, according to the federal government's definition 
C)  the percentage of working adults whose annual income is sufficiently low as to be exempt from paying income taxes 
D)  the percentage of households who qualify for government assistance to meet the minimal requirement for adequate nutrition 
A)  the rate at which the number of people relative to the size of the population fall below the poverty line 
B)  the percentage of the population earning an annual income below the poverty line, according to the federal government's definition 
C)  the percentage of working adults whose annual income is sufficiently low as to be exempt from paying income taxes 
D)  the percentage of households who qualify for government assistance to meet the minimal requirement for adequate nutrition

What does a Lorenz curve illustrate?

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

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

-Refer to Figure 16-1. The sales tax revenue collected by the government is represented by the area

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

The federal government and some state governments levy taxes on specific goods such as petrol, cigarettes and beer. These are known as

What is the difference between the poverty line and the poverty rate?

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

For a given supply curve, how does the elasticity of demand affect the burden of a tax imposed on a product?

-Refer to Figure 16-2. If the government imposes an excise tax of $1.00 on every unit sold, what is the size of the deadweight loss, if there is any?

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

If you pay $2000 in taxes on an income of $20 000, and a tax of $3500 on an income of $30 000, then over this range of income the tax is

Economists argue that the corporate income tax is an example of a tax with a high deadweight loss because

As the value of the Gini coefficient approaches zero,

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

A marginal tax rate is calculated as

-Refer to Figure 16-2. If the government imposes an excise tax of $1.00 on every unit sold, the consumer's burden of the tax

The term tax incidence refers to

The actual division of the burden of a tax is called

What is the poverty rate?

Economics Foundations and Models

Choices and Trade - Offs in the Market

Where Prices Come Frome : The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency , Government Price Setting and Taxes

Concumer Choice and Behavioural Economics

Technology , Production and Costs

Firms in Perfectly Compitive Markets

Monopoly Markets

Monopolistic Competition : The Competitive Model in More Realistic Setting

Oligopoly : Firms in Less Competitve Markets

The Market for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities , Environmental Policy and Public Goods

Filters

Exam 16: The Distribution of Income and Social Policy

What does a Lorenz curve illustrate?

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

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

-Refer to Figure 16-1. The sales tax revenue collected by the government is represented by the area

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

The federal government and some state governments levy taxes on specific goods such as petrol, cigarettes and beer. These are known as

What is the difference between the poverty line and the poverty rate?

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

For a given supply curve, how does the elasticity of demand affect the burden of a tax imposed on a product?

-Refer to Figure 16-2. If the government imposes an excise tax of $1.00 on every unit sold, what is the size of the deadweight loss, if there is any?

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

If you pay $2000 in taxes on an income of $20 000, and a tax of $3500 on an income of $30 000, then over this range of income the tax is

Economists argue that the corporate income tax is an example of a tax with a high deadweight loss because

As the value of the Gini coefficient approaches zero,

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

A marginal tax rate is calculated as

-Refer to Figure 16-2. If the government imposes an excise tax of $1.00 on every unit sold, the consumer's burden of the tax

The term tax incidence refers to

The actual division of the burden of a tax is called

What is the poverty rate?

Economics Foundations and Models

Choices and Trade - Offs in the Market

Where Prices Come Frome : The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency , Government Price Setting and Taxes

Concumer Choice and Behavioural Economics

Technology , Production and Costs

Firms in Perfectly Compitive Markets

Monopoly Markets

Monopolistic Competition : The Competitive Model in More Realistic Setting

Oligopoly : Firms in Less Competitve Markets

The Market for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities , Environmental Policy and Public Goods

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.