Question 1

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 2

According to the ability-to-pay principle of taxation

Accepted Answer

A) individuals who receive the benefit of a good or service should bear a greater share of the tax burden. 
B) it is fair to expect a greater share of the tax burden to be borne by people who have a greater ability to pay. 
C) people in the same economic situation should bear an equal share of the tax burden. 
D) individuals who are willing to bear a greater share of the tax burden should be compensated with non-monetary benefits. 
A) individuals who receive the benefit of a good or service should bear a greater share of the tax burden. 
B) it is fair to expect a greater share of the tax burden to be borne by people who have a greater ability to pay. 
C) people in the same economic situation should bear an equal share of the tax burden. 
D) individuals who are willing to bear a greater share of the tax burden should be compensated with non-monetary benefits.

Question 3

The sales tax

Accepted Answer

A) is consistent with the benefits-received principle because low-income individuals spend less on goods and services than do high-income people. 
B) is not consistent with the ability-to-pay principle because low-income individuals tend to spend a larger fraction of their income than do high-income individuals. 
C) is not consistent with the ability-to-pay principle because low-income individuals tend to purchase a smaller bundle of goods and services compared to high-income individuals. 
D) is not consistent with the benefits-received principle because low-income individuals spend less on goods and services than do high-income individuals, yet pay the same sales tax rate. 
A) is consistent with the benefits-received principle because low-income individuals spend less on goods and services than do high-income people. 
B) is not consistent with the ability-to-pay principle because low-income individuals tend to spend a larger fraction of their income than do high-income individuals. 
C) is not consistent with the ability-to-pay principle because low-income individuals tend to purchase a smaller bundle of goods and services compared to high-income individuals. 
D) is not consistent with the benefits-received principle because low-income individuals spend less on goods and services than do high-income individuals, yet pay the same sales tax rate.

Question 4

The Arrow impossibility theorem

Accepted Answer

A) explains why people can be rational as well as ignorant at the same time. 
B) explains why voting systems do not consistently represent the preferences of voters. 
C) explains why candidates for public office must represent the preferences of the political middle. 
D) explains why it is impossible, in most cases, to eliminate special-interest legislation after it has become law. 
A) explains why people can be rational as well as ignorant at the same time. 
B) explains why voting systems do not consistently represent the preferences of voters. 
C) explains why candidates for public office must represent the preferences of the political middle. 
D) explains why it is impossible, in most cases, to eliminate special-interest legislation after it has become law.

Question 5

Between 1980 and 2014, income inequality in the United States has increased in part due to rapid technological change.How does technological change contribute to income inequality?

Accepted Answer

A) Advancements in technology displace skilled and unskilled workers in certain fields, leading to higher unemployment rates. 
B) Technology complements the skills of the well-educated while rendering redundant the labor services of unskilled and low-skilled workers. This causes a decline in the wages of low and unskilled workers relative to other workers. 
C) The opportunity cost of investing in technology is investments in human capital. The resulting decrease in labor's marginal productivity has led to lower wages. 
D) Technological change favors the owners of capital and since high-income individuals tend to own capital, income inequality is further exacerbated. 
A) Advancements in technology displace skilled and unskilled workers in certain fields, leading to higher unemployment rates. 
B) Technology complements the skills of the well-educated while rendering redundant the labor services of unskilled and low-skilled workers. This causes a decline in the wages of low and unskilled workers relative to other workers. 
C) The opportunity cost of investing in technology is investments in human capital. The resulting decrease in labor's marginal productivity has led to lower wages. 
D) Technological change favors the owners of capital and since high-income individuals tend to own capital, income inequality is further exacerbated.

Question 6

Both presidents Kennedy and Reagan proposed significant cuts in income taxes.Opponents of these tax cut proposals argued that

Accepted Answer

A) the tax cuts would benefit high-income taxpayers. 
B) cutting state sales taxes, rather than federal income taxes, would result in greater economic efficiency. 
C) while the tax cuts would result in greater economic efficiency, there was too much opposition to the tax cuts in Congress. As it turned out, Congress ultimately approved both tax cut proposals. 
D) it would be better to cut taxes on corporate profits. 
A) the tax cuts would benefit high-income taxpayers. 
B) cutting state sales taxes, rather than federal income taxes, would result in greater economic efficiency. 
C) while the tax cuts would result in greater economic efficiency, there was too much opposition to the tax cuts in Congress. As it turned out, Congress ultimately approved both tax cut proposals. 
D) it would be better to cut taxes on corporate profits.

Question 7

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 8

Table 18-2
  
-Refer to Table 18-2.The table above lists three policy alternatives that the U.S.Senate will vote on, along with the ranking of these alternates.The Senate must decide which of these alternatives should receive an additional $1 billion of funding, and there is enough money in the federal budget for only one of these alternatives.If a series of votes is taken in which each pair of alternatives is considered (homeland security and education; homeland security and medical research; education and medical research)which of the following will result from these votes?

Accepted Answer

A) When the vote is between homeland security and education, the Senators will vote for education to receive funding. 
B) The Senators' votes will demonstrate transitivity. 
C) The results will illustrate the voting paradox. 
D) The results from the voting will illustrate the median voter theorem. 
A) When the vote is between homeland security and education, the Senators will vote for education to receive funding. 
B) The Senators' votes will demonstrate transitivity. 
C) The results will illustrate the voting paradox. 
D) The results from the voting will illustrate the median voter theorem.

Question 9

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 10

Suppose, on average, a family in Church Falls earning $60,000 per year paid 6 percent of its income in state taxes.A family earning $80,000 paid, on average, $4,760 in state income taxes.Are state 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 11

A tax bracket is

Accepted Answer

A) the percent of taxable income paid in taxes at a specific income bracket. 
B) the income range within which a particular tax rate applies. 
C) the type of tax structure for which a range of taxes applies. 
D) the range, from the high to the low tax rate, of a particular type of tax. 
A) the percent of taxable income paid in taxes at a specific income bracket. 
B) the income range within which a particular tax rate applies. 
C) the type of tax structure for which a range of taxes applies. 
D) the range, from the high to the low tax rate, of a particular type of tax.

Question 12

According to the horizontal-equity principle of taxation

Accepted Answer

A) individuals who receive the benefits of a good or service should bear a greater share of the tax burden. 
B) individuals who are most able to pay should bear a greater share of the tax burden. 
C) people in the same economic situation should be treated equally. 
D) individuals who are willing to bear a greater share of the tax burden should be compensated with non-monetary benefits. 
A) individuals who receive the benefits of a good or service should bear a greater share of the tax burden. 
B) individuals who are most able to pay should bear a greater share of the tax burden. 
C) people in the same economic situation should be treated equally. 
D) individuals who are willing to bear a greater share of the tax burden should be compensated with non-monetary benefits.

Question 13

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 14

There is a difference between who is legally required to send a tax payment to the government and who bears the burden of the tax.Which of the following would have the most impact on who bears the burden of an excise tax?

Accepted Answer

A) whether the tax is imposed by the federal government or a state government 
B) whether the tax is based on the ability-to-pay principle or the benefits-received principle 
C) The motive for the tax. If the tax is designed to raise revenue, more of the burden will fall on firms. If the tax is designed to achieve a social objective (for example, to discourage smoking)more of the burden will fall on consumers. 
D) The elasticity of demand for the item that is taxed. 
A) whether the tax is imposed by the federal government or a state government 
B) whether the tax is based on the ability-to-pay principle or the benefits-received principle 
C) The motive for the tax. If the tax is designed to raise revenue, more of the burden will fall on firms. If the tax is designed to achieve a social objective (for example, to discourage smoking)more of the burden will fall on consumers. 
D) The elasticity of demand for the item that is taxed.

Question 15

Table 18-7
   
Table 18-7 shows the amount of taxes paid on various levels of income.
-Refer to Table 18-7.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 $16,000 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 $16,000 and $22,000.

Question 16

Compare the distribution of income in the United States with the distribution of income in other high-income countries.

Accepted Answer

Income in the United

Question 17

The largest source of revenue for the federal government of the United States is from

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 18

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

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

According to the ability-to-pay principle of taxation

The sales tax

The Arrow impossibility theorem

Between 1980 and 2014, income inequality in the United States has increased in part due to rapid technological change.How does technological change contribute to income inequality?

Both presidents Kennedy and Reagan proposed significant cuts in income taxes.Opponents of these tax cut proposals argued that

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

The Gini coefficient is measured by

A tax bracket is

According to the horizontal-equity principle of taxation

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

There is a difference between who is legally required to send a tax payment to the government and who bears the burden of the tax.Which of the following would have the most impact on who bears the burden of an excise tax?

Table 18-7 Table 18-7 shows the amount of taxes paid on various levels of income. -Refer to Table 18-7.The tax system is

Compare the distribution of income in the United States with the distribution of income in other high-income countries.

The largest source of revenue for the federal government of the United States is from

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.

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 More Realistic Setting

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

According to the ability-to-pay principle of taxation

The sales tax

The Arrow impossibility theorem

Between 1980 and 2014, income inequality in the United States has increased in part due to rapid technological change.How does technological change contribute to income inequality?

Both presidents Kennedy and Reagan proposed significant cuts in income taxes.Opponents of these tax cut proposals argued that

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

The Gini coefficient is measured by

A tax bracket is

According to the horizontal-equity principle of taxation

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

There is a difference between who is legally required to send a tax payment to the government and who bears the burden of the tax.Which of the following would have the most impact on who bears the burden of an excise tax?

Table 18-7 Table 18-7 shows the amount of taxes paid on various levels of income. -Refer to Table 18-7.The tax system is

Compare the distribution of income in the United States with the distribution of income in other high-income countries.

The largest source of revenue for the federal government of the United States is from

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.

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 More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Filters