Question 1

The actual division of a tax between buyers and sellers in a market is the excess burden of the tax.

Accepted Answer

A) True 
 B)False

Question 2

Rational ignorance

Accepted Answer

A) explains why consumers ignore sunk costs when they vote. 
B) explains the Arrow impossibility theorem. 
C) refers to attempts by special interests to use government action to make themselves better off at the expense of others. 
D) helps to explain why rent seeking by special interest groups occurs. 
A) explains why consumers ignore sunk costs when they vote. 
B) explains the Arrow impossibility theorem. 
C) refers to attempts by special interests to use government action to make themselves better off at the expense of others. 
D) helps to explain why rent seeking by special interest groups occurs.

Question 3

Suppose the equilibrium price and quantity of a 12-pack of Dr.Pepper 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.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?

Accepted Answer

@#IMG-DLM& The excess burden of the tax

Question 4

The Arrow impossibility theorem explains

Accepted Answer

A) why there is no system of voting that will consistently represent the underlying preferences of voters. 
B) why government regulation of private markets will always result in a reduction in economic efficiency in these markets. 
C) why voters are always rationally ignorant. 
D) why it is not possible to provide the economically efficient amount of any public good. 
A) why there is no system of voting that will consistently represent the underlying preferences of voters. 
B) why government regulation of private markets will always result in a reduction in economic efficiency in these markets. 
C) why voters are always rationally ignorant. 
D) why it is not possible to provide the economically efficient amount of any public good.

Question 5

Describe each of the principles governments consider when deciding which taxes to use.

Accepted Answer

In deciding which taxes to use, a govern

Question 6

Table 18-4
  
-Refer to Table 18-4.The table above outlines the rankings of three members of the U.S.House of Representatives on three spending alternatives.Assume that Congress can spend additional revenue on only one of the three spending alternatives and that Tom, Dick, and Harriet, all members of the House of Representatives, 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)Foreign Aid and Post-Secondary Education (2)Foreign Aid and Roads and Bridges and (3)Post-Secondary Education and Roads and Bridges.
Determine whether the voting paradox will occur as a result of these votes.

Accepted Answer

First vote:
 @#IMG-DLM& 
First vote: the majority

Question 7

The public choice model raises questions about the government's ability to regulate economic activity efficiently.Which of the following statements represents the views of most economists with regard to the role of government?

Accepted Answer

A) Congress should abolish the Food and Drug Administration, the Environmental Protection Agency, and other agencies and commissions because the costs of their actions exceed the benefits they provide to the public. 
B) Government should do more to regulate markets. The public choice model has shown that rent seeking and rational ignorance affect more markets than are currently subject to regulation. 
C) U.S. citizens can afford more government regulation if the cost of this regulation is borne mostly by taxpayers with the highest incomes. 
D) Agencies such as the Food and Drug Administration and the Environmental Protection Agency can serve a useful purpose, but we need to take the costs of regulation into account along with the benefits. 
A) Congress should abolish the Food and Drug Administration, the Environmental Protection Agency, and other agencies and commissions because the costs of their actions exceed the benefits they provide to the public. 
B) Government should do more to regulate markets. The public choice model has shown that rent seeking and rational ignorance affect more markets than are currently subject to regulation. 
C) U.S. citizens can afford more government regulation if the cost of this regulation is borne mostly by taxpayers with the highest incomes. 
D) Agencies such as the Food and Drug Administration and the Environmental Protection Agency can serve a useful purpose, but we need to take the costs of regulation into account along with the benefits.

Question 8

Income inequality in the United States has increased somewhat over the past 25 years.Two factors that appear to have contributed to this are

Accepted Answer

A) tax cuts on high-income individuals and large increases in prices of stocks. 
B) strong economic growth and low inflation. 
C) rapid technological change and expanding international trade. 
D) outsourcing of jobs by U.S. firms and cuts in taxes on capital gains. 
A) tax cuts on high-income individuals and large increases in prices of stocks. 
B) strong economic growth and low inflation. 
C) rapid technological change and expanding international trade. 
D) outsourcing of jobs by U.S. firms and cuts in taxes on capital gains.

Question 9

Table 18-8
   
Table 18-8 shows the amount of taxes paid on various levels of income.
-Refer to Table 18-8.The tax system is

Accepted Answer

A) progressive throughout all levels of income. 
B) proportional throughout all levels of income. 
C) regressive throughout all levels of income. 
D) progressive between $10,000 and $12,000 of income and regressive between $12,000 and $22,000. 
A) progressive throughout all levels of income. 
B) proportional throughout all levels of income. 
C) regressive throughout all levels of income. 
D) progressive between $10,000 and $12,000 of income and regressive between $12,000 and $22,000.

Question 10

What is regulatory capture?

Accepted Answer

A) It is a situation in which a policymaker 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 policymaker 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 11

Gasoline taxes that are typically used for highway construction and maintenance are consistent with which of the following principles of taxation?

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 12

"For a given supply curve, the excess burden of a tax will be greater when the demand for a product is less elastic than when the demand is more elastic." This statement is

Accepted Answer

A) correct. 
B) incorrect because the incidence of the tax, not the burden of the tax, is affected by the elasticity of demand. 
C) incorrect. When demand is less elastic, the burden of the tax is smaller than when the demand is more elastic. 
D) incorrect. The statement confuses demand with quantity demanded. 
A) correct. 
B) incorrect because the incidence of the tax, not the burden of the tax, is affected by the elasticity of demand. 
C) incorrect. When demand is less elastic, the burden of the tax is smaller than when the demand is more elastic. 
D) incorrect. The statement confuses demand with quantity demanded.

Question 13

Last year, Anthony Millanti earned exactly $30,000 of taxable income.Assume that the income tax system used to determine Anthony's tax liability is progressive.The table below lists the tax brackets and the marginal tax rates that apply to each bracket.
a.Draw a new table that lists the amounts of income tax that Anthony is obligated to pay for each tax bracket, and the total tax he owes the government.(Assume that there are no allowable tax deductions, tax credits, personal exemptions, or any other deductions that Anthony can use to reduce his tax liability).
b.Determine Anthony's average tax rate.

Accepted Answer

a.
 @#IMG-DLM& 
b.The average tax rate i

Question 14

A situation where a member of Congress votes to approve a bill in exchange for favorable votes from other members on other bills is called

Accepted Answer

A) rent seeking. 
B) logrolling. 
C) regulatory capture. 
D) special interest legislation. 
A) rent seeking. 
B) logrolling. 
C) regulatory capture. 
D) special interest legislation.

Question 15

In reference to the federal income tax system, a tax bracket is

Accepted Answer

A) the estimated amount of federal income tax firms withhold from their employees' paychecks. 
B) the formula the federal government uses to determine the dollar amount of the personal exemption and the amounts taxpayers are allowed for deductions from their incomes. 
C) used to determine the average tax rate. 
D) the income range within which a tax rate applies. 
A) the estimated amount of federal income tax firms withhold from their employees' paychecks. 
B) the formula the federal government uses to determine the dollar amount of the personal exemption and the amounts taxpayers are allowed for deductions from their incomes. 
C) used to determine the average tax rate. 
D) the income range within which a tax rate applies.

Question 16

Which of the following is an example of rent seeking behavior?

Accepted Answer

A) Apple earned large profits from the development and sale of the iPhone. 
B) Amazon introduced the Kindle to compete with Sony's Digital Reader. Amazon was motivated by the desire to earn profits from the Kindle but also increased the choice of digital music players available to consumers. 
C) U.S. sugar firms convinced Congress to impose a quota on imports of sugar. 
D) Recent increases in cigarette taxes faced little opposition from voters, many of whom were rationally ignorant with respect to the tax. 
A) Apple earned large profits from the development and sale of the iPhone. 
B) Amazon introduced the Kindle to compete with Sony's Digital Reader. Amazon was motivated by the desire to earn profits from the Kindle but also increased the choice of digital music players available to consumers. 
C) U.S. sugar firms convinced Congress to impose a quota on imports of sugar. 
D) Recent increases in cigarette taxes faced little opposition from voters, many of whom were rationally ignorant with respect to the tax.

Question 17

Vertical-equity is most closely associated with which of the following goals or principles?

Accepted Answer

A) the horizontal-equity principle 
B) the goal of economic efficiency 
C) the goal of attaining social objectives 
D) the ability-to-pay principle 
A) the horizontal-equity principle 
B) the goal of economic efficiency 
C) the goal of attaining social objectives 
D) the ability-to-pay principle

Question 18

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

Marginal tax rate =

Question 19

A personal exemption refers to

Accepted Answer

A) the tax rate that applies to a particular tax bracket. 
B) the tax bracket that represents basic living expenses. 
C) an amount representing basic living expenses that can be subtracted from income. 
D) a dispensation that allows certain qualifying individuals not to pay federal taxes. 
A) the tax rate that applies to a particular tax bracket. 
B) the tax bracket that represents basic living expenses. 
C) an amount representing basic living expenses that can be subtracted from income. 
D) a dispensation that allows certain qualifying individuals not to pay federal taxes.

Question 20

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

The actual division of a tax between buyers and sellers in a market is the excess burden of the tax.

Rational ignorance

The Arrow impossibility theorem explains

Describe each of the principles governments consider when deciding which taxes to use.

The public choice model raises questions about the government's ability to regulate economic activity efficiently.Which of the following statements represents the views of most economists with regard to the role of government?

Income inequality in the United States has increased somewhat over the past 25 years.Two factors that appear to have contributed to this are

Table 18-8 Table 18-8 shows the amount of taxes paid on various levels of income. -Refer to Table 18-8.The tax system is

What is regulatory capture?

Gasoline taxes that are typically used for highway construction and maintenance are consistent with which of the following principles of taxation?

"For a given supply curve, the excess burden of a tax will be greater when the demand for a product is less elastic than when the demand is more elastic." This statement is

A situation where a member of Congress votes to approve a bill in exchange for favorable votes from other members on other bills is called

In reference to the federal income tax system, a tax bracket is

Which of the following is an example of rent seeking behavior?

Vertical-equity is most closely associated with which of the following goals or principles?

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.

A personal exemption refers to

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

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

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Filters

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

The actual division of a tax between buyers and sellers in a market is the excess burden of the tax.

Rational ignorance

The Arrow impossibility theorem explains

Describe each of the principles governments consider when deciding which taxes to use.

The public choice model raises questions about the government's ability to regulate economic activity efficiently.Which of the following statements represents the views of most economists with regard to the role of government?

Income inequality in the United States has increased somewhat over the past 25 years.Two factors that appear to have contributed to this are

Table 18-8 Table 18-8 shows the amount of taxes paid on various levels of income. -Refer to Table 18-8.The tax system is

What is regulatory capture?

Gasoline taxes that are typically used for highway construction and maintenance are consistent with which of the following principles of taxation?

"For a given supply curve, the excess burden of a tax will be greater when the demand for a product is less elastic than when the demand is more elastic." This statement is

A situation where a member of Congress votes to approve a bill in exchange for favorable votes from other members on other bills is called

In reference to the federal income tax system, a tax bracket is

Which of the following is an example of rent seeking behavior?

Vertical-equity is most closely associated with which of the following goals or principles?

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.

A personal exemption refers to

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

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

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Filters