Question 1

The idea that two taxpayers in the same economic circumstances should pay the same level of taxes is known as the

Accepted Answer

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

Question 2

Table 15.4
 $\begin{array}{|c|c|}
\hline \text { Income Tax Bracket } & \text { Marginal Tax Rate } \
\hline \$ 0-8,000 & 12 \% \
\hline 8,001-22,000 & 17 \% \
\hline 22,001-48,000 & 25 \% \
\hline 48,001 \text { and over } & 38 \% \
\hline
\end{array}$ 
Table 15.4 shows the income tax brackets and tax rates for single taxpayers in Madeupistan.
-Refer to Table 15.4.Sasha is a single taxpayer with an income of $60,000.What is his marginal tax rate and what is his average tax rate?

Accepted Answer

A) marginal tax rate = 38%; average tax rate = 23% 
B) marginal tax rate = 17%; average tax rate = 21% 
C) marginal tax rate = 38%; average tax rate = 24% 
D) marginal tax rate = 23%; average tax rate = 38% 
A) marginal tax rate = 38%; average tax rate = 23% 
B) marginal tax rate = 17%; average tax rate = 21% 
C) marginal tax rate = 38%; average tax rate = 24% 
D) marginal tax rate = 23%; average tax rate = 38%

Question 3

Suppose, on average, a family in Church Falls earning $60,000 per year paid 6 percent of its income in provincial taxes.A family earning $80,000 paid, on average, $4,760 in provincial income taxes.Are provincial taxes in Church Falls progressive or regressive? Be sure to explain the difference between a progressive tax and a regressive tax.

Accepted Answer

A regressive tax is a tax for which peop

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 government's revenue from the tax

Accepted Answer

A) is larger if the supply curve is S₀. 
B) is larger if the supply curve is S₁. 
C) is identical under either supply curve. 
D) is not maximized. 
A) is larger if the supply curve is S₀. 
B) is larger if the supply curve is S₁. 
C) is identical under either supply curve. 
D) is not maximized.

Question 5

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 greater under the more elastic supply curve S₀. 
B) is greater under the less elastic supply curve S₀. 
C) is greater under the less elastic supply curve S₁. 
D) is the same under either supply curve because there is a single demand curve that captures buyers' market behavior. 
A) is greater under the more elastic supply curve S₀. 
B) is greater under the less elastic supply curve S₀. 
C) is greater under the less elastic supply curve S₁. 
D) is the same under either supply curve because there is a single demand curve that captures buyers' market behavior.

Question 6

Suppose in an effort to raise tax revenue, British Columbia decides to legalize the sale of marijuana.The province will charge a tax of $10 per gram on each sale, and the province claims that retailers will bear the entire burden of this tax.Draw a graph illustrating the situation where retail outlets would bear the entire tax burden of $10 per gram of marijuana.Explain what would need to be true about the demand for marijuana for retailers to bear the entire burden of this tax, and if this would likely occur if marijuana sales were actually legalized.

Accepted Answer

For retailers to bear the entire burden

Question 7

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 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 8

The median voter theorem will be an accurate predicator of the outcomes of elections

Accepted Answer

A) only when voter turnout is very high. 
B) when a majority of voters have preferences very similar to those of the median voter. 
C) when a majority of voters have preferences different from those of the median voter. 
D) regardless of whether preferences among voters are similar or different from those of the median voter. 
A) only when voter turnout is very high. 
B) when a majority of voters have preferences very similar to those of the median voter. 
C) when a majority of voters have preferences different from those of the median voter. 
D) regardless of whether preferences among voters are similar or different from those of the median voter.

Question 9

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 consumer's burden of the tax

Accepted Answer

A) is greater under the more elastic supply curve S₀. 
B) is greater under the less elastic supply curve S₀. 
C) is greater under the less elastic supply curve S₁. 
D) is the same under either supply curve because there is a single demand curve that captures buyers' market behavior. 
A) is greater under the more elastic supply curve S₀. 
B) is greater under the less elastic supply curve S₀. 
C) is greater under the less elastic supply curve S₁. 
D) is the same under either supply curve because there is a single demand curve that captures buyers' market behavior.

Question 10

Which of the following statements about a consumption tax is false?

Accepted Answer

A) Compared to an income tax, a consumption tax would necessarily produce lower revenues for the government in a given year because the portion of income saved is not taxed. 
B) A consumption tax encourages saving, which when invested could lead to increased economic activity. 
C) Under a consumption tax, current consumption is taxed at a lower rate than future consumption. 
D) A consumption tax could favour high-income individuals who are likely to save more than low-income individuals. 
A) Compared to an income tax, a consumption tax would necessarily produce lower revenues for the government in a given year because the portion of income saved is not taxed. 
B) A consumption tax encourages saving, which when invested could lead to increased economic activity. 
C) Under a consumption tax, current consumption is taxed at a lower rate than future consumption. 
D) A consumption tax could favour high-income individuals who are likely to save more than low-income individuals.

Question 11

Which of the following is not an example of rent seeking behavior?

Accepted Answer

A) competition for subsidies 
B) lobbying the government to impose tariffs on certain imported products 
C) competition for the exclusive right to import a product 
D) engaging in aggressive advertising that slams a competitor's product 
A) competition for subsidies 
B) lobbying the government to impose tariffs on certain imported products 
C) competition for the exclusive right to import a product 
D) engaging in aggressive advertising that slams a competitor's product

Question 12

For a given supply curve, the deadweight loss from the imposition of a tax is smaller if demand is more elastic.

Accepted Answer

A) True 
 B)False

Question 13

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 14

Between 1976 and 2010, income inequality in Canada has increased in part due to expanding international trade.How does expanding international trade contribute to income inequality?

Accepted Answer

A) It increases the demand for a wide array of products which in turn increases prices beyond the reach of average income individuals. 
B) It allows producers to exploit workers and reduce the wages they are willing to pay workers. 
C) Domestic firms can now hire low-skilled workers anywhere in the world, putting Canadian workers in competition with foreign workers. This has caused the wages of unskilled workers to be depressed relative to the wages of other workers. 
D) It reduces the cost of producing goods and therefore lowers the value of labour's services. 
A) It increases the demand for a wide array of products which in turn increases prices beyond the reach of average income individuals. 
B) It allows producers to exploit workers and reduce the wages they are willing to pay workers. 
C) Domestic firms can now hire low-skilled workers anywhere in the world, putting Canadian workers in competition with foreign workers. This has caused the wages of unskilled workers to be depressed relative to the wages of other workers. 
D) It reduces the cost of producing goods and therefore lowers the value of labour's services.

Question 15

Which of the following statements about rent seeking is false?

Accepted Answer

A) Rent seeking often involves governments because governments transfer huge amounts of funds that economic agents must compete for. 
B) A person is engaging in rent seeking behavior when he uses the political process to acquire ownership of a resource that belongs to the public. 
C) Because rent seeking redistributes society's resources, anyone engaging in such behavior is violating the law. 
D) If a firm can benefit from government intervention in the economy, it is more likely to spend resources attempting to secure this intervention than toward innovating its product to gain a competitive edge in the market. 
A) Rent seeking often involves governments because governments transfer huge amounts of funds that economic agents must compete for. 
B) A person is engaging in rent seeking behavior when he uses the political process to acquire ownership of a resource that belongs to the public. 
C) Because rent seeking redistributes society's resources, anyone engaging in such behavior is violating the law. 
D) If a firm can benefit from government intervention in the economy, it is more likely to spend resources attempting to secure this intervention than toward innovating its product to gain a competitive edge in the market.

Question 16

As the value of the Gini coefficient approaches one,

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 17

"Sin taxes," such as taxes on alcoholic beverages, are intended to

Accepted Answer

A) increase the amount of the products supplied. 
B) generate money to subsidize production of the products taxed. 
C) reduce the quantity demanded. 
D) generate funds to aid in the medical care of those harmed by the product. 
A) increase the amount of the products supplied. 
B) generate money to subsidize production of the products taxed. 
C) reduce the quantity demanded. 
D) generate funds to aid in the medical care of those harmed by the product.

Question 18

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

Accepted Answer

A) earn 20 percent of the society's total income. 
B) earn 36 percent of the society's total income. 
C) earn 48 percent of the society's total income. 
D) earn 50 percent of the society's total income. 
A) earn 20 percent of the society's total income. 
B) earn 36 percent of the society's total income. 
C) earn 48 percent of the society's total income. 
D) earn 50 percent of the society's total income.

Question 19

If, as your taxable income decreases, you pay a larger percentage of your taxable income in taxes, then the tax is

Accepted Answer

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

Question 20

Table 15.4
 $\begin{array}{|c|c|}
\hline \text { Income Tax Bracket } & \text { Marginal Tax Rate } \
\hline \$ 0-8,000 & 12 \% \
\hline 8,001-22,000 & 17 \% \
\hline 22,001-48,000 & 25 \% \
\hline 48,001 \text { and over } & 38 \% \
\hline
\end{array}$ 
Table 15.4 shows the income tax brackets and tax rates for single taxpayers in Madeupistan.
-Refer to Table 15.4.Calculate the income tax paid by Sasha, a single taxpayer with an income of $60,000.

Accepted Answer

A) $22,800 
B) $14,399 
C) $13,800 
D) $13,642 
A) $22,800 
B) $14,399 
C) $13,800 
D) $13,642

The idea that two taxpayers in the same economic circumstances should pay the same level of taxes is known as the

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 government's revenue from the tax

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

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 consumer's burden of the tax

The median voter theorem will be an accurate predicator of the outcomes of elections

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 consumer's burden of the tax

Which of the following statements about a consumption tax is false?

Which of the following is not an example of rent seeking behavior?

For a given supply curve, the deadweight loss from the imposition of a tax is smaller if demand is more elastic.

The actual division of the burden of a tax is called

Between 1976 and 2010, income inequality in Canada has increased in part due to expanding international trade.How does expanding international trade contribute to income inequality?

Which of the following statements about rent seeking is false?

As the value of the Gini coefficient approaches one,

"Sin taxes," such as taxes on alcoholic beverages, are intended to

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

If, as your taxable income decreases, you pay a larger percentage of your taxable income in taxes, then the tax 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

The idea that two taxpayers in the same economic circumstances should pay the same level of taxes is known as the

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 government's revenue from the tax

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

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 consumer's burden of the tax

The median voter theorem will be an accurate predicator of the outcomes of elections

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 consumer's burden of the tax

Which of the following statements about a consumption tax is false?

Which of the following is not an example of rent seeking behavior?

For a given supply curve, the deadweight loss from the imposition of a tax is smaller if demand is more elastic.

The actual division of the burden of a tax is called

Between 1976 and 2010, income inequality in Canada has increased in part due to expanding international trade.How does expanding international trade contribute to income inequality?

Which of the following statements about rent seeking is false?

As the value of the Gini coefficient approaches one,

"Sin taxes," such as taxes on alcoholic beverages, are intended to

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

If, as your taxable income decreases, you pay a larger percentage of your taxable income in taxes, then the tax 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