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

The federal corporate income tax is

Suppose the equilibrium price and quantity of a 12-pack of pop are $5.00 and 10,000 12-packs, respectively, and the government decides to impose a $1.00 tax on every 12-pack of carbonated soft drinks in an effort to fight obesity.Draw two supply and demand graphs, one showing the excess burden of the tax when supply is less elastic and the other showing the excess burden of the tax when supply is more elastic.Identify the excess burden of the tax on each graph.On which graph is the excess burden the greatest?

What is the low income cut-off?

The median voter model implies that

If the government wants to minimize the welfare loss of a tax, it should tax goods with more inelastic demands or supplies.

Explain the effect of price elasticities of supply and demand on tax incidence.

The government of Silverado raises revenue to operate the city's hospital, open to all residents, through a general income tax paid by its residents.This method of raising revenue is consistent with the benefits-received principle.

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,

If you pay $2,000 in taxes on an income of $20,000, and a tax of $3,500 on an income of $30,000, then over this range of income the tax is

Rational ignorance

Local governments in Canada receive most of their revenue from

Exempting food purchases from sales tax is consistent with the ability-to-pay principle, although not necessarily consistent with vertical equity.

The "ability-to-pay" principle of taxation is the normative idea that

A focus on relative poverty, rather than absolute poverty could lead to

Provincial governments get most of their operating funds from

In Canada

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

The government of Notrealia raises revenue through a general income tax paid by all its residents to operate the city's marina.The marina is used by private boat owners.This method of raising revenue to operate the marina is

Figure 15.3 -Refer to Figure 15.3.Rank the above panels in terms of most unequal income distribution to least unequal income distribution.

Table 15.2 Highway Improvements Employment Insurance Benefits Social Safetynet Reform Bart 1st 3rd 2nd Lisa 2nd lst 3rd Maggie 3rd 2nd 1st -Refer to Table 15.2.The table above outlines the rankings of three members of Parliament on three spending alternatives.Assume that Parliament can spend additional revenue on only one of the three spending alternatives and that Bart, Lisa, and Maggie, all members of Parliament, participate in a series of votes in which they are to determine which of the spending alternatives should receive funding.Three votes will be taken: (1)Highway Improvements and Employment Insurance Benefits (2)Highway Improvements and Social Safetynet Reform and (3)Employment Insurance Benefits and Social Safetynet Reform. Show the results of each vote and determine whether the voting paradox will occur as a result of these votes.