Question 1

If your income is $40,000 and you pay taxes of $4,650, what is your average tax rate? Show your work.

Accepted Answer

Average tax rate = $4,650/$40,000 = 0.11625 or 11.625 percent.

Question 2

Why is a typical person likely to gather more information when buying a new car than when voting for a Member of Parliament?

Accepted Answer

A) because a person's preferences are more likely to be met with little effort in the political sphere but this is not the case when buying a car in the private marketplace 
B) because it is less costly to acquire information about consumer items than it is about political candidates 
C) because buying a new car affects a person more immediately and personally compared to voting for a Member of Parliament; in the latter, a person's vote is only one of many voters and therefore, not likely to have a large impact on the outcome 
D) because the effects of buying a car are long term while a Member of Parliament has a relatively short tenure 
A) because a person's preferences are more likely to be met with little effort in the political sphere but this is not the case when buying a car in the private marketplace 
B) because it is less costly to acquire information about consumer items than it is about political candidates 
C) because buying a new car affects a person more immediately and personally compared to voting for a Member of Parliament; in the latter, a person's vote is only one of many voters and therefore, not likely to have a large impact on the outcome 
D) because the effects of buying a car are long term while a Member of Parliament has a relatively short tenure C

Question 3

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

Accepted Answer

A) True 
 B)False  True

Question 4

Figure 15.2
   
Figure 15.2 shows a demand curve and two sets of supply curves, one set more elastic than the other.
-Refer to Figure 15.2.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. 
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 5

Table 15.5
 $\begin{array}{|c|c|}
\hline \text { Income Tax Bracket } & \text { Tax Rate } \
\hline \text { on the first } \$ 6,000 \text { of taxable income } & 10 \% \
\hline \text { on the next } \$ 14,000 \text { of taxable income } & 15 \% \
\hline \text { on the next } \$ 24,500 \text { of taxable income } & 25 \% \
\hline \text { on the next } \$ 30,500 \text { of taxable income } & 30 \% \
\hline
\end{array}$ 
Table 15.5 shows the income tax brackets and tax rates for single taxpayers in Bauxhall.
-Refer to Table 15.5.A tax exemption is granted for the first $10,000 earned per year.Suppose you earn $75,000.
a.What is the amount of taxes you will pay?
b.What is your average tax rate?
c.What is your marginal tax rate?

Accepted Answer

a.($6,000 × 0.10)+ ($14,000 ×

Question 6

Consider a public good such as fire protection services.Rich people may benefit more than the poor from such a service because rich people stand to lose more from a fire that destroys property.In this case,

Accepted Answer

A) the ability-to-pay principle may support the rich paying more taxes than the poor, but not the benefits-received principle. 
B) the benefits-received principle may support the rich paying more taxes than the poor, but not the ability-to-pay principle. 
C) both the benefits-received and the ability-to-pay principles may support the rich paying more taxes than the poor. 
D) neither the benefits-received nor the ability-to-pay principles may support the rich paying more taxes than the poor. 
A) the ability-to-pay principle may support the rich paying more taxes than the poor, but not the benefits-received principle. 
B) the benefits-received principle may support the rich paying more taxes than the poor, but not the ability-to-pay principle. 
C) both the benefits-received and the ability-to-pay principles may support the rich paying more taxes than the poor. 
D) neither the benefits-received nor the ability-to-pay principles may support the rich paying more taxes than the poor.

Question 7

The Gini coefficient is measured by

Accepted Answer

A) summing up the cumulative income percentages on the Lorenz curve. 
B) summing up the total income earned by the population and dividing by the size of the population. 
C) using the formula: area between perfect inequality and Lorenz curve ÷ area between the line of perfect equality to the Lorenz curve. 
D) using the formula: area between the line of perfect equality and the Lorenz curve ÷ the area under the line of perfect equality. 
A) summing up the cumulative income percentages on the Lorenz curve. 
B) summing up the total income earned by the population and dividing by the size of the population. 
C) using the formula: area between perfect inequality and Lorenz curve ÷ area between the line of perfect equality to the Lorenz curve. 
D) using the formula: area between the line of perfect equality and the Lorenz curve ÷ the area under the line of perfect equality.

Question 8

The idea that individuals should be taxed in proportion to the marginal benefits that they receive from public goods is called

Accepted Answer

A) the ability-to-pay principle. 
B) the horizontal-equity principle. 
C) the vertical-equity principle. 
D) the benefits-received principle. 
A) the ability-to-pay principle. 
B) the horizontal-equity principle. 
C) the vertical-equity principle. 
D) the benefits-received principle.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

What is the relationship between market failure and government failure?

Accepted Answer

Market failure is a case where the marke

Question 11

Suppose the provincial government imposes an 8 percent sales tax on clothing items and the tax is levied on sellers.Who pays for the tax in this situation? (Assume that the demand curve is downward-sloping and that the supply curve is upward-sloping.)

Accepted Answer

A) The tax is borne entirely by the sellers. 
B) The sellers will pass on the entire sales tax to consumers and therefore the consumers bear the tax. 
C) The tax will be borne partly by consumers and partly by sellers. 
D) It is not possible to answer the question without information on price elasticities. 
A) The tax is borne entirely by the sellers. 
B) The sellers will pass on the entire sales tax to consumers and therefore the consumers bear the tax. 
C) The tax will be borne partly by consumers and partly by sellers. 
D) It is not possible to answer the question without information on price elasticities.

Question 12

Under a consumption tax, households

Accepted Answer

A) are exempt from taxes on interest earned on savings. 
B) pay taxes only on the part of income they spend. 
C) pay higher taxes on the part of income they spend and lower taxes on the part of income they save. 
D) pay taxes only on their purchases of luxury items. 
A) are exempt from taxes on interest earned on savings. 
B) pay taxes only on the part of income they spend. 
C) pay higher taxes on the part of income they spend and lower taxes on the part of income they save. 
D) pay taxes only on their purchases of luxury items.

Question 13

If you pay $2,000 in taxes on an income of $20,000, and a tax of $3,000 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 14

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 15

What is regulatory capture?

Accepted Answer

A) It is a situation in which a policy maker seeks to improve his election prospects by aligning himself with a powerful special interest group which will finance his political campaign. 
B) It is the exchange of political support between a regulatory agency and the regulated firm resulting in both parties capturing economic rents. 
C) It is a situation in which a firm being regulated successfully influences the regulatory agency's actions to benefit the interests of the firm, rather than the public interest. 
D) It is a situation in which a regulatory agency uses its authority to force actions that are not favored by the regulated firms but are in the public's interest. 
A) It is a situation in which a policy maker seeks to improve his election prospects by aligning himself with a powerful special interest group which will finance his political campaign. 
B) It is the exchange of political support between a regulatory agency and the regulated firm resulting in both parties capturing economic rents. 
C) It is a situation in which a firm being regulated successfully influences the regulatory agency's actions to benefit the interests of the firm, rather than the public interest. 
D) It is a situation in which a regulatory agency uses its authority to force actions that are not favored by the regulated firms but are in the public's interest.

Question 16

The largest source of revenue for the federal government of Canada

Accepted Answer

A) tariffs collected on imported goods. 
B) property taxes imposed on private property. 
C) sales taxes on items purchased for consumption. 
D) individual income taxes. 
A) tariffs collected on imported goods. 
B) property taxes imposed on private property. 
C) sales taxes on items purchased for consumption. 
D) individual income taxes.

Question 17

A marginal tax rate is

Accepted Answer

A) the fraction of income that must be paid in taxes. 
B) the fraction of each additional dollar of income that must be paid in taxes. 
C) the incremental income one must earn to offset each additional dollar of tax. 
D) the ratio of a change in income to a change in taxes paid. 
A) the fraction of income that must be paid in taxes. 
B) the fraction of each additional dollar of income that must be paid in taxes. 
C) the incremental income one must earn to offset each additional dollar of tax. 
D) the ratio of a change in income to a change in taxes paid.

Question 18

What is the voting paradox?

Accepted Answer

A) the observation that less than 60 percent of those eligible to vote actually vote 
B) the observation that majority voting may not always result in consistent choices 
C) the idea that wealthy corporations are able to sway politicians to act in ways contrary to the desires of the majority 
D) people are aware that their votes will not change the political outcome since these outcomes are predetermined by a group of influential politicians 
A) the observation that less than 60 percent of those eligible to vote actually vote 
B) the observation that majority voting may not always result in consistent choices 
C) the idea that wealthy corporations are able to sway politicians to act in ways contrary to the desires of the majority 
D) people are aware that their votes will not change the political outcome since these outcomes are predetermined by a group of influential politicians

Question 19

Figure 15.4
   
Figure 15.4 shows the Lorenz curve for a hypothetical country.
-Refer to Figure 15.4.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 20

An example of an excise tax in Canada is

Accepted Answer

A) the extra you pay for alcoholic drinks. 
B) taxes on corporate profit. 
C) employment insurance premiums. 
D) property taxes on real estate. 
A) the extra you pay for alcoholic drinks. 
B) taxes on corporate profit. 
C) employment insurance premiums. 
D) property taxes on real estate.

If your income is $40,000 and you pay taxes of $4,650, what is your average tax rate? Show your work.

Why is a typical person likely to gather more information when buying a new car than when voting for a Member of Parliament?

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

Figure 15.2 Figure 15.2 shows a demand curve and two sets of supply curves, one set more elastic than the other. -Refer to Figure 15.2.If the government imposes an excise tax of $1.00 on every unit sold, the producer's burden of the tax

Consider a public good such as fire protection services.Rich people may benefit more than the poor from such a service because rich people stand to lose more from a fire that destroys property.In this case,

The Gini coefficient is measured by

The idea that individuals should be taxed in proportion to the marginal benefits that they receive from public goods is called

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

What is the relationship between market failure and government failure?

Suppose the provincial government imposes an 8 percent sales tax on clothing items and the tax is levied on sellers.Who pays for the tax in this situation? (Assume that the demand curve is downward-sloping and that the supply curve is upward-sloping.)

Under a consumption tax, households

If you pay $2,000 in taxes on an income of $20,000, and a tax of $3,000 on an income of $30,000, then over this range of income the tax is

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

What is regulatory capture?

The largest source of revenue for the federal government of Canada

A marginal tax rate is

What is the voting paradox?

Figure 15.4 Figure 15.4 shows the Lorenz curve for a hypothetical country. -Refer to Figure 15.4.The highest 20 percent of households

An example of an excise tax in Canada is

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

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

The Markets for Labour and Other Factors of Production

Pricing Strategy

Firms, the Stock Market, and Corporate Governance

Filters

Exam 15: Public Choice, Taxes, and the Distribution of Income

If your income is $40,000 and you pay taxes of $4,650, what is your average tax rate? Show your work.

Why is a typical person likely to gather more information when buying a new car than when voting for a Member of Parliament?

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

Figure 15.2 Figure 15.2 shows a demand curve and two sets of supply curves, one set more elastic than the other. -Refer to Figure 15.2.If the government imposes an excise tax of $1.00 on every unit sold, the producer's burden of the tax

Consider a public good such as fire protection services.Rich people may benefit more than the poor from such a service because rich people stand to lose more from a fire that destroys property.In this case,

The Gini coefficient is measured by

The idea that individuals should be taxed in proportion to the marginal benefits that they receive from public goods is called

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

What is the relationship between market failure and government failure?

Suppose the provincial government imposes an 8 percent sales tax on clothing items and the tax is levied on sellers.Who pays for the tax in this situation? (Assume that the demand curve is downward-sloping and that the supply curve is upward-sloping.)

Under a consumption tax, households

If you pay $2,000 in taxes on an income of $20,000, and a tax of $3,000 on an income of $30,000, then over this range of income the tax is

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

What is regulatory capture?

The largest source of revenue for the federal government of Canada

A marginal tax rate is

What is the voting paradox?

Figure 15.4 Figure 15.4 shows the Lorenz curve for a hypothetical country. -Refer to Figure 15.4.The highest 20 percent of households

An example of an excise tax in Canada is

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

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

The Markets for Labour and Other Factors of Production

Pricing Strategy

Firms, the Stock Market, and Corporate Governance

Filters