Question 1

According to projections for 2011 by the Tax Policy Center,the 20 percent of U.S.taxpayers who make the highest incomes

Accepted Answer

A)  use loopholes and tax exemptions to reduce their share of federal income taxes to less than 20 percent.
B)  pay almost 70 percent of federal income taxes.
C)  pay about 90 percent of federal income taxes but only about 20 percent of Social Security and Medicare payroll taxes.
D)  pay more in excise and other taxes than they pay in Social Security and Medicare payroll taxes. B

Question 2

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 B

Question 3

A change from an income tax to a consumption tax system would cause the greatest increase in taxes owed by those who currently put part of their savings into 401(k)retirement plans and Individual Retirement Accounts.

Accepted Answer

A) True 
 B)False  False

Question 4

Which of the following statements about the distribution of income in the United States is true?

Accepted Answer

A)  The United States has the most unequal distribution of income of any high-income country in the world.
B)  The United States has a more unequal distribution of income than Bolivia and Botswana.
C)  The distribution of income in the United States is fairly equal and there have been no dramatic changes over time.
D)  The distribution of income in the United States is unequal and has become significantly more unequal over time.

Question 5

Measures of poverty (for example,the poverty line)and the distribution of income (for example,the Lorenz curve and the Gini coefficient)are misleading for which of the following two reasons?

Accepted Answer

A)  First,these measures do not take into account income mobility over time.Second,these measures ignore the effects of government programs meant to reduce poverty.
B)  First,none of these measures are adjusted for inflation.Second,they do not measure income on a per capita basis.
C)  First,these measures fail to include the income U.S.citizens earn working for foreign firms that have operations located in the United States.Second,these measures fail to include income foreign citizens earn working for U.S.firms that have operations in foreign countries.
D)  First,these measures fail to include dividend and interest income earned on stocks and bonds.Second,these measures fail to include the value of goods and services citizens make for their own consumption that are not sold in markets.

Question 6

If official poverty statistics for the United States included transfer payments individuals receive from the government,such as Social Security payments and other non-cash benefits such as food stamps,

Accepted Answer

A)  the poverty rate would be lower.
B)  poverty would be eliminated.
C)  income inequality would be greater.
D)  the poverty rate would be overstated.

Question 7

Most economists agree that some of the burden of the corporate income tax

Accepted Answer

A)  is reduced because the tax is progressive.
B)  is shared by the federal government.
C)  is reduced because the tax is used to attain a social objective.
D)  is passed on to consumers in the form of higher prices.

Question 8

The horizontal-equity principle of taxation is not easy to use in practice because

Accepted Answer

A)  some people engage in rent seeking to reduce their taxes below the level other people pay.
B)  people can use tax loopholes to reduce their incomes below the incomes of other taxpayers.
C)  different people receive different levels of government benefits even if their incomes are the same.
D)  it is difficult to determine whether people are in the same economic situation.

Question 9

Which of the following statements is true?

Accepted Answer

A)  If transfer payments such as Social Security payments to the retired and disabled were excluded from official statistics used to estimate the percentage of people with incomes below the poverty line,the amount of poverty in the United States would be much greater.
B)  Because the federal income tax system is progressive,measuring poverty using after-tax incomes results in a higher poverty rate than if poverty is measured using before-tax incomes .
C)  If non-cash benefits such as food stamps and rent subsidies were added to the incomes of low-income families,poverty would be eliminated.
D)  In the United States,income remaining after federal taxes are paid is more equally distributed than income before taxes.

Question 10

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 minimized 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 11

The largest source of tax revenue for state and local governments in the United States in 2010 was

Accepted Answer

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

Question 12

A common belief among political analysts is that someone running for his or her party's nomination for president of the United States must choose a different strategy once the nomination is secured.To be nominated,the candidate must appeal to voters from one party - Democrat or Republican - but in a general election a party's nominee must appeal to voters from both parties as well as independent voters.Which of the following offers the best explanation for this change in strategy?

Accepted Answer

A)  the Arrow impossibility theorem
B)  the voting paradox
C)  the median voter theorem
D)  rent seeking

Question 13

In the United States,taxpayers are allowed to exclude from taxation a certain amount of income,called

Accepted Answer

A)  the personal income exclusion.
B)  the income allowance.
C)  the income tax credit.
D)  the personal exemption.

Question 14

A key assumption of the public choice model is that government policymakers will pursue their own self-interests.Economists assume that consumers and firms pursue their own self-interests when they interact in competitive markets and this interaction results in efficient economic outcomes.Does the pursuit of self-interest by policymakers result in efficient economic outcomes?

Accepted Answer

The answer of A key assumption of the public choice...

Question 15

With respect to the tax cut on dividends that occurred in the early 2000s,President Obama argued that the tax cut ________ the burden on individuals with low and moderate incomes,and ________ the burden on the wealthy and on corporations,thereby increasing the level of income inequality.

Accepted Answer

A)  increased; increased
B)  increased; decreased
C)  decreased; increased
D)  decreased; decreased

Question 16

Figure 18-1 
-Refer to Figure 18-1.Area B+C represents

Accepted Answer

A)  the portion of sales tax revenue borne by consumers.
B)  the portion of sales tax revenue borne by producers.
C)  the excess burden of the sales tax.
D)  sales tax revenue collected by the government.

Question 17

Which of the following is a consequence of the voting paradox?

Accepted Answer

A)  A majority of voters elect a candidate that does not represent the preferences of the voter who is in the political middle.
B)  Politicians support small groups of individuals and firms that benefit from special interest legislation,rather than a much larger group of voters who pay the cost for this legislation.
C)  Individuals and firms who benefit from government actions engage in rent seeking.
D)  The collective preferences of voters are not transitive and voting outcomes are inconsistent.

Question 18

A tax is efficient if it imposes a small excess burden relative to the tax revenue it raises.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following groups had the highest poverty rate in 2010 in the United States?

Accepted Answer

A)  Asians
B)  White males
C)  Hispanics
D)  Female heads of families

Question 20

Table 18-6
  Table 18-6 shows the income tax brackets and tax rates for single taxpayers in Monrovia.
-Refer to Table 18-6.Calculate the income tax paid by Sylvia,a single taxpayer with an income of $70,000.

Accepted Answer

A)  $21,000
B)  $15,740
C)  $15,400
D)  $13,475

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