Question 1

When the demand for a product is more elastic than the supply

Accepted Answer

A) consumers pay the majority of the tax on the product. 
B) consumers pay the entire tax on the product. 
C) firms pay the majority of the tax on the product. 
D) firms pay the entire tax on the product. 
A) consumers pay the majority of the tax on the product. 
B) consumers pay the entire tax on the product. 
C) firms pay the majority of the tax on the product. 
D) firms pay the entire tax on the product.

Question 2

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 3

A key insight of the public choice model is that public policymakers are likely to pursue the public's interest, even if their self-interests conflict with the public interest.

Accepted Answer

A) True 
 B)False

Question 4

A tax is efficient if it imposes a small excess burden relative to the tax revenue it raises.

Accepted Answer

A) True 
 B)False

Question 5

Many state governments use lotteries to raise revenue.If a lottery is viewed as a tax, is it most likely a progressive tax or a regressive tax? What information would you need to determine whether the burden of a lottery is progressive or regressive?

Accepted Answer

The lottery "tax" is generally considere

Question 6

The public choice model can be used to examine voting models that contrast the manner in which collective decisions are made by governments (state, local, and federal)and the manner in which individual choices are made in markets.Which of the following descriptions is consistent with the difference between collective decision-making and decision-making in markets?

Accepted Answer

A) Everyone who votes must agree with a decision made collectively through government, but in markets individuals can make their own choices. 
B) Individuals are less likely to see their preferences represented in the outcomes of government policies than in the outcomes of markets. 
C) The cost of a government policy is determined by a majority vote of members of the public; decisions made in markets are based on individual willingness to pay. 
D) Choices made through government policies are more important than decisions individuals make through markets. 
A) Everyone who votes must agree with a decision made collectively through government, but in markets individuals can make their own choices. 
B) Individuals are less likely to see their preferences represented in the outcomes of government policies than in the outcomes of markets. 
C) The cost of a government policy is determined by a majority vote of members of the public; decisions made in markets are based on individual willingness to pay. 
D) Choices made through government policies are more important than decisions individuals make through markets.

Question 7

What is the difference between a marginal tax rate and an average tax rate? Which is more important in determining the impact of the tax system on economic behavior?

Accepted Answer

A marginal tax rate is the fraction of e

Question 8

Figure 18-2
   
Figure 18-2 shows a demand curve and two sets of supply curves, one set more elastic than the other.
-Refer to Figure 18-2.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 9

Most economists agree that some of the burden of the corporate income tax

Accepted Answer

A) is reduced because the tax is progressive. 
B) is shared by the federal government. 
C) is reduced because the tax is used to attain a social objective. 
D) is passed on to consumers in the form of higher prices. 
A) is reduced because the tax is progressive. 
B) is shared by the federal government. 
C) is reduced because the tax is used to attain a social objective. 
D) is passed on to consumers in the form of higher prices.

Question 10

Congressman Flack votes for a program that will benefit the constituents of Congressman Walpole.Which of the following explanations for Flack's vote is most consistent with the public choice model?

Accepted Answer

A) Congressman Flack did not have time to read and understand all of the legislation he voted on. Members of Congress often depend on their staffs to read proposed legislation and recommend how they should vote. 
B) Legislators such as Congressman Flack are similar to other decision-makers in that they sometimes make irrational choices. 
C) Congressman Flack will support programs of legislators from his own party, regardless of who benefits from these programs. 
D) Congressman Flack expects Congressman Walpole's support for programs that will benefit Flack's constituents. 
A) Congressman Flack did not have time to read and understand all of the legislation he voted on. Members of Congress often depend on their staffs to read proposed legislation and recommend how they should vote. 
B) Legislators such as Congressman Flack are similar to other decision-makers in that they sometimes make irrational choices. 
C) Congressman Flack will support programs of legislators from his own party, regardless of who benefits from these programs. 
D) Congressman Flack expects Congressman Walpole's support for programs that will benefit Flack's constituents.

Question 11

Article Summary
Monthly marijuana sales in Colorado topped $100 million for the first time in August, 2015, with $59.2 million in recreational sales and $41.4 million in medical sales. Colorado has levied three types of state taxes on recreational-use marijuana: a 2.9% standard sales tax, a 10% special marijuana sales tax, and a 15% excise tax on wholesale marijuana transfers. The 15% excise tax is earmarked for school construction projects. In August, recreational-use taxes and fees totaled $11.2 million and medical taxes and fees were $2 million, bringing total revenue-to-date for the year to over $86 million.
Source: Elizabeth Hernandez, "Colorado monthly marijuana sales eclipse $100 million mark," Denver Post, October 9, 2015.
-Refer to the Article Summary above.Colorado taxes marijuana with a 12.9% sales tax on buyers and a 15% wholesale excise tax on producers, or a total tax of 27.9% Suppose the actual burden of the tax falls 80 percent on consumers and 20 percent on producers.In this case, consumers will actually bear the tax burden of about ________ percent of the selling price and producers will actually bear the tax burden of ________ percent of the selling price.

Accepted Answer

A) 22; 6 
B) 46; 54 
C) 13; 15 
D) 80; 20 
A) 22; 6 
B) 46; 54 
C) 13; 15 
D) 80; 20

Question 12

In the United States, over the past 40 years federal revenues as a share of gross domestic product have

Accepted Answer

A) risen steadily and now are about 40 percent. 
B) ranged between 17 and 19 percent. 
C) fallen below 10 because of rapid economic growth. 
D) been limited by law to no more than 20 percent. 
A) risen steadily and now are about 40 percent. 
B) ranged between 17 and 19 percent. 
C) fallen below 10 because of rapid economic growth. 
D) been limited by law to no more than 20 percent.

Question 13

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 14

Table 18-1
   
Suppose $1 billion is available in the budget and Congress is considering allocating the funds to one of the following three alternatives: 1)Subsidies for education, 2)Research on Alzheimer's or 3)Increased border security.Table 18-1 shows three voters' rankings of the alternatives.
-Refer to Table 18-1.Suppose a series of votes are taken in which each pair of alternatives is considered in turn.If the vote is between allocating funds to education subsidies and increased border security

Accepted Answer

A) Ivy and Jasmine vote for education subsidies, Rose votes for increased border security, and education subsidies wins. 
B) Ivy and Rose vote for increased border security, Jasmine votes for education subsidies, and increased border security wins. 
C) Jasmine and Rose vote for education subsidies, Rose votes for increased border security, and education subsidies wins. 
D) Jasmine and Ivy vote for increased border security, Rose votes for education subsidies, and increased border security wins. 
A) Ivy and Jasmine vote for education subsidies, Rose votes for increased border security, and education subsidies wins. 
B) Ivy and Rose vote for increased border security, Jasmine votes for education subsidies, and increased border security wins. 
C) Jasmine and Rose vote for education subsidies, Rose votes for increased border security, and education subsidies wins. 
D) Jasmine and Ivy vote for increased border security, Rose votes for education subsidies, and increased border security wins.

Question 15

The marginal tax rate is

Accepted Answer

A) the amount of taxes paid as a percentage of income. 
B) the amount of per-capita taxes paid. 
C) the amount of taxes paid as a percentage of gross domestic product (GDP). 
D) the fraction of each additional dollar of income that must be paid in taxes. 
A) the amount of taxes paid as a percentage of income. 
B) the amount of per-capita taxes paid. 
C) the amount of taxes paid as a percentage of gross domestic product (GDP). 
D) the fraction of each additional dollar of income that must be paid in taxes.

Question 16

Income inequality increases as the Gini coefficient approaches 1.

Accepted Answer

A) True 
 B)False

Question 17

The complexity of the U.S.federal income tax system results in significant annual deadweight losses.The opportunity cost of the hours taxpayers spend on record keeping and completing their tax returns amounts to billions of dollars.
a.If the tax system was simplified, how would this benefit the economy?
b.Why hasn't the tax system been simplified?

Accepted Answer

a.Reducing the time and effort now requi

Question 18

When members of Congress vote to pass new legislation, they will

Accepted Answer

A) always vote for the alternative favored by a majority of the voters. 
B) fail to consistently represent the underlying preferences of voters. 
C) always vote for the alternative favored by a plurality of the voters if there is no majority position. 
D) always fail to represent the underlying preferences of voters. 
A) always vote for the alternative favored by a majority of the voters. 
B) fail to consistently represent the underlying preferences of voters. 
C) always vote for the alternative favored by a plurality of the voters if there is no majority position. 
D) always fail to represent the underlying preferences of voters.

Question 19

The term "payroll taxes" is often used to refer to

Accepted Answer

A) individual income taxes that are withheld from paychecks. 
B) corporate income taxes. 
C) Social Security and Medicare taxes. 
D) sales taxes. 
A) individual income taxes that are withheld from paychecks. 
B) corporate income taxes. 
C) Social Security and Medicare taxes. 
D) sales taxes.

Question 20

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.

When the demand for a product is more elastic than the supply

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

A key insight of the public choice model is that public policymakers are likely to pursue the public's interest, even if their self-interests conflict with the public interest.

A tax is efficient if it imposes a small excess burden relative to the tax revenue it raises.

Many state governments use lotteries to raise revenue.If a lottery is viewed as a tax, is it most likely a progressive tax or a regressive tax? What information would you need to determine whether the burden of a lottery is progressive or regressive?

What is the difference between a marginal tax rate and an average tax rate? Which is more important in determining the impact of the tax system on economic behavior?

Figure 18-2 Figure 18-2 shows a demand curve and two sets of supply curves, one set more elastic than the other. -Refer to Figure 18-2.If the government imposes an excise tax of $1.00 on every unit sold, the producer's burden of the tax

Most economists agree that some of the burden of the corporate income tax

Congressman Flack votes for a program that will benefit the constituents of Congressman Walpole.Which of the following explanations for Flack's vote is most consistent with the public choice model?

In the United States, over the past 40 years federal revenues as a share of gross domestic product have

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

The marginal tax rate is

Income inequality increases as the Gini coefficient approaches 1.

When members of Congress vote to pass new legislation, they will

The term "payroll taxes" is often used to refer to

Which of the following statements about rent seeking is false?

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

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

When the demand for a product is more elastic than the supply

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

A key insight of the public choice model is that public policymakers are likely to pursue the public's interest, even if their self-interests conflict with the public interest.

A tax is efficient if it imposes a small excess burden relative to the tax revenue it raises.

Many state governments use lotteries to raise revenue.If a lottery is viewed as a tax, is it most likely a progressive tax or a regressive tax? What information would you need to determine whether the burden of a lottery is progressive or regressive?

What is the difference between a marginal tax rate and an average tax rate? Which is more important in determining the impact of the tax system on economic behavior?

Figure 18-2 Figure 18-2 shows a demand curve and two sets of supply curves, one set more elastic than the other. -Refer to Figure 18-2.If the government imposes an excise tax of $1.00 on every unit sold, the producer's burden of the tax

Most economists agree that some of the burden of the corporate income tax

Congressman Flack votes for a program that will benefit the constituents of Congressman Walpole.Which of the following explanations for Flack's vote is most consistent with the public choice model?

In the United States, over the past 40 years federal revenues as a share of gross domestic product have

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

The marginal tax rate is

Income inequality increases as the Gini coefficient approaches 1.

When members of Congress vote to pass new legislation, they will

The term "payroll taxes" is often used to refer to

Which of the following statements about rent seeking is false?

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