Question 1

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.
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?

Accepted Answer

The answer of Figure 18-3 
-Refer to Figure 18-3. The...

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

If voters lack an economic incentive to become informed about pending legislation, then their preferences become a constraint on legislators voting for rent-seeking legislation.

Accepted Answer

A) True 
 B)False

Question 4

Explain why it is more difficult to determine the incidence of the corporate income tax than it is to determine the incidence of the tax on gasoline.

Accepted Answer

The answer of Explain why it is more difficult to...

Question 5

Horizontal equity is achieved when taxes are collected from those who benefit from the government expenditure of the tax revenue.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

The answer of What is the difference between the poverty...

Question 7

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

Accepted Answer

A)  pay a lower percentage of their incomes in tax than do people with higher incomes. 
B)  pay a higher percentage of their incomes in tax than do people with higher incomes. 
C)  pay the same percentage of their incomes in tax as do people with higher incomes. 
D)  do not have to pay unless their incomes exceeds a certain amount.

Question 8

The Arrow impossibility theorem states that

Accepted Answer

A)  no system of voting can be devised that will always consistently represent the underlying preferences of voters. 
B)  it is impossible for a majority voting system not to consistently represent the preferences of voters. 
C)  it is impossible to separate corporate desires from public bureaucracy. 
D)  no system of voting can be devised that will ensure a 100 percent voter turnout.

Question 9

Table 18-9
  Table 18-9 shows the income tax brackets and tax rates for single taxpayers in Monrovia.
-Refer to Table 18-9. Sylvia is a single taxpayer with an income of $70,000. What is her marginal tax rate and what is her average tax rate?

Accepted Answer

A)  marginal tax rate = 30%; average tax rate = 30% 
B)  marginal tax rate = 8%; average tax rate = 19.3% 
C)  marginal tax rate = 30%; average tax rate = 22.5% 
D)  marginal tax rate = 20%; average tax rate = 30%

Question 10

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 11

In 2012, over 75 percent of the revenue of the U.S. federal government was raised through

Accepted Answer

A)  individual income and social insurance taxes. 
B)  property and social insurance taxes. 
C)  sales and corporate income taxes. 
D)  individual income and property taxes.

Question 12

If your income is $92,000 and you pay taxes of $19,475, what is your average tax rate? Show your work.

Accepted Answer

The answer of If your income is $92,000 and you...

Question 13

If the marginal tax rate is equal to the average tax rate as taxable income increases, the tax structure is

Accepted Answer

A)  regressive. 
B)  proportional. 
C)  progressive. 
D)  unfair.

Question 14

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.

Question 15

If you pay $14,000 in taxes on an income of $125,000, and $17,400 in taxes on an income of $144,000, what is your marginal tax rate? Show your work.

Accepted Answer

The answer of If you pay $14,000 in taxes on...

Question 16

Describe the main factors economists believe cause inequality of income.

Accepted Answer

The answer of Describe the main factors economists believe cause...

Question 17

The political process is more likely to serve the interests of individuals whose preferences are in the middle, rather than individuals with preferences that are much to the left or right of the political center. This statement is best explained by which of the following?

Accepted Answer

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

Question 18

The public choice model asserts that the self-interest of policymakers is likely to cause them to take actions that are inconsistent with the preferences of voters, even where those preferences are clear.

Accepted Answer

A) True 
 B)False

Question 19

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 producer's burden of the tax

Accepted Answer

A)  is Pa - Pd under either supply curve. 
B)  is Pb - Pe under either supply curve. 
C)  is Pa - Pd if the supply curve is S0 and Pb - Pe if the supply curve is S1. 
D)  is Pc - Pd if the supply curve is S0 and Pc - Pe if the supply curve is S1.

Question 20

An average tax rate is calculated as

Accepted Answer

A)  total taxable income × taxes paid. 
B)  total taxable income ÷ taxes paid. 
C)  taxes paid ÷ total taxable income. 
D)  (total taxable income - taxes paid) ÷ taxable income.

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

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

If voters lack an economic incentive to become informed about pending legislation, then their preferences become a constraint on legislators voting for rent-seeking legislation.

Explain why it is more difficult to determine the incidence of the corporate income tax than it is to determine the incidence of the tax on gasoline.

Horizontal equity is achieved when taxes are collected from those who benefit from the government expenditure of the tax revenue.

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

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

The Arrow impossibility theorem states that

Table 18-9 Table 18-9 shows the income tax brackets and tax rates for single taxpayers in Monrovia. -Refer to Table 18-9. Sylvia is a single taxpayer with an income of $70,000. What is her marginal tax rate and what is her average tax rate?

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

In 2012, over 75 percent of the revenue of the U.S. federal government was raised through

If your income is $92,000 and you pay taxes of $19,475, what is your average tax rate? Show your work.

If the marginal tax rate is equal to the average tax rate as taxable income increases, the tax structure is

The term tax incidence refers to

If you pay $14,000 in taxes on an income of $125,000, and $17,400 in taxes on an income of $144,000, what is your marginal tax rate? Show your work.

Describe the main factors economists believe cause inequality of income.

The political process is more likely to serve the interests of individuals whose preferences are in the middle, rather than individuals with preferences that are much to the left or right of the political center. This statement is best explained by which of the following?

The public choice model asserts that the self-interest of policymakers is likely to cause them to take actions that are inconsistent with the preferences of voters, even where those preferences are clear.

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 producer's burden of the tax

An average tax rate is calculated as