Question 1

From 1970 to 2010, the poverty rate in East Asia rose slightly but the level of poverty in sub-Saharan Africa fell dramatically.

Accepted Answer

A) True 
 B)False

Question 2

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 research on Alzheimer's and increased border security

Accepted Answer

A) Ivy and Jasmine vote for Alzheimer's research, Rose votes for increased border security, and Alzheimer's research wins. 
B) Ivy and Rose vote for increased border security, Jasmine votes for Alzheimer's research, and increased border security wins. 
C) Jasmine and Rose vote for Alzheimer's research, Ivy votes for increased border security, and Alzheimer's research wins. 
D) Jasmine and Ivy vote for increased border security, Rose votes for Alzheimer's research, and increased border security wins. 
A) Ivy and Jasmine vote for Alzheimer's research, Rose votes for increased border security, and Alzheimer's research wins. 
B) Ivy and Rose vote for increased border security, Jasmine votes for Alzheimer's research, and increased border security wins. 
C) Jasmine and Rose vote for Alzheimer's research, Ivy votes for increased border security, and Alzheimer's research wins. 
D) Jasmine and Ivy vote for increased border security, Rose votes for Alzheimer's research, and increased border security wins.

Question 3

If the government is most interested in minimizing excess burden of an excise tax, should it impose the tax on goods that are elastic or on goods that are inelastic?

Accepted Answer

If the government wants to min

Question 4

What is meant by the term "rational ignorance"?

Accepted Answer

A) It refers to the absence of a negative incentive, for example, a fine for not voting, which results in a low voter turnout. 
B) It refers to a situation where one policymaker deliberately approves a bill he does not support in exchange for a future favorable vote for his own cause. 
C) It means the lack an economic incentive for voters to become informed about a pending legislation. 
D) It refers to the fact that policymakers and their constituents have different ideas of what it means to behave rationally and each party deliberately ignores the other's view. 
A) It refers to the absence of a negative incentive, for example, a fine for not voting, which results in a low voter turnout. 
B) It refers to a situation where one policymaker deliberately approves a bill he does not support in exchange for a future favorable vote for his own cause. 
C) It means the lack an economic incentive for voters to become informed about a pending legislation. 
D) It refers to the fact that policymakers and their constituents have different ideas of what it means to behave rationally and each party deliberately ignores the other's view.

Question 5

All of the following occur whenever a government taxes a product except

Accepted Answer

A) the quantity consumed of that product falls. 
B) the price of that product rises. 
C) the marginal benefit of the last unit sold exceeds the marginal cost of producing it. 
D) there will be no excess burden if the government's tax revenue is sufficiently large to offset the deadweight loss. 
A) the quantity consumed of that product falls. 
B) the price of that product rises. 
C) the marginal benefit of the last unit sold exceeds the marginal cost of producing it. 
D) there will be no excess burden if the government's tax revenue is sufficiently large to offset the deadweight loss.

Question 6

A study by the Congressional Budget Office (CBO)regarding the corporate income tax included the following statement: "A corporation may write its check to the Internal Revenue Service for payment of the corporate income tax, but the money must come from somewhere..." The comments that followed this statement argued that

Accepted Answer

A) corporations pass on some of the burden of the tax to investors in the company, to workers, and to consumers. 
B) the corporate income tax is a reliable source of revenue because corporations cannot avoid paying the tax. 
C) it is necessary to retain the tax because it is based on the ability-to-pay principle. 
D) the tax is more progressive than the individual income tax. 
A) corporations pass on some of the burden of the tax to investors in the company, to workers, and to consumers. 
B) the corporate income tax is a reliable source of revenue because corporations cannot avoid paying the tax. 
C) it is necessary to retain the tax because it is based on the ability-to-pay principle. 
D) the tax is more progressive than the individual income tax.

Question 7

The federal corporate income tax is

Accepted Answer

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

Question 8

Absolute poverty measures vary from country to country.For example, in 2015, the poverty line in the United States for a family of four with two children was an annual income of $24,250 but economists often use a much lower threshold income of $1 per day when calculating the rate of poverty in poor countries.How is this absolute poverty measured?

Accepted Answer

A) by comparing the percentage of households living below the poverty line to the total population 
B) by comparing a household's income to the income required to maintain the average standard of living in a society at a particular time 
C) by comparing the amount of goods and services that a household's income can purchase to an objective measure of the amount of income needed to sustain a certain predetermined standard of living 
D) by comparing the amount of goods and services that a household's income can purchase in one country to the amount of goods and services that a household's income can purchase in another country of comparable living standard 
A) by comparing the percentage of households living below the poverty line to the total population 
B) by comparing a household's income to the income required to maintain the average standard of living in a society at a particular time 
C) by comparing the amount of goods and services that a household's income can purchase to an objective measure of the amount of income needed to sustain a certain predetermined standard of living 
D) by comparing the amount of goods and services that a household's income can purchase in one country to the amount of goods and services that a household's income can purchase in another country of comparable living standard

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

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.The first pair considered is between subsidies for education and research on Alzheimer's.The second pair considered is between Alzheimer's research and increased border security.The third pair considered is between education subsidies and increased border security.In this case, the collective preferences of the voters

Accepted Answer

A) turn out to be transitive and will yield a consistent outcome. 
B) turn out to be transitive but will not result in a consistent outcome. 
C) turn out not to be transitive and will not result in a consistent outcome. 
D) turn out not to be transitive but will yield a consistent outcome. 
A) turn out to be transitive and will yield a consistent outcome. 
B) turn out to be transitive but will not result in a consistent outcome. 
C) turn out not to be transitive and will not result in a consistent outcome. 
D) turn out not to be transitive but will yield a consistent outcome.

Question 11

An average tax rate is calculated as

Accepted Answer

A) total taxable income × taxes paid. 
B) total taxable income ÷ taxes paid. 
C) taxes paid ÷ total taxable income. 
D) (total taxable income - taxes paid)÷ taxable income. 
A) total taxable income × taxes paid. 
B) total taxable income ÷ taxes paid. 
C) taxes paid ÷ total taxable income. 
D) (total taxable income - taxes paid)÷ taxable income.

Question 12

One result of the public choice model is that most economists believe that

Accepted Answer

A) when market failure occurs, government intervention will always lead to a more efficient outcome. 
B) government intervention will always result in a reduction in economic efficiency in regulated markets. 
C) policymakers may have incentives to intervene in the economy in ways that do not promote economic efficiency. 
D) the voting paradox will prevent voters from selecting the best person for public office. 
A) when market failure occurs, government intervention will always lead to a more efficient outcome. 
B) government intervention will always result in a reduction in economic efficiency in regulated markets. 
C) policymakers may have incentives to intervene in the economy in ways that do not promote economic efficiency. 
D) the voting paradox will prevent voters from selecting the best person for public office.

Question 13

Some individuals seek to use government action to make themselves better off at the expense of others.The actions of these individuals

Accepted Answer

A) are examples of fraud; but these individuals usually avoid prosecution because of logrolling and rational ignorance. 
B) are examples of rent seeking. 
C) offer proof that Adam Smith's "invisible hand" is not valid. 
D) are evidence of the voting paradox. 
A) are examples of fraud; but these individuals usually avoid prosecution because of logrolling and rational ignorance. 
B) are examples of rent seeking. 
C) offer proof that Adam Smith's "invisible hand" is not valid. 
D) are evidence of the voting paradox.

Question 14

Figure 18-1
  
-Refer to Figure 18-1.The sales tax revenue collected by the government is represented by the area

Accepted Answer

A) B + C. 
B) F + G. 
C) E + H. 
D) B + C + F + G. 
A) B + C. 
B) F + G. 
C) E + H. 
D) B + C + F + G.

Question 15

Suppose $1 billion is available in the budget and Congress is considering allocating the funds to one of the following three alternatives:
A.subsidies for education
B.research on Alzheimer's
C.increased border security
If voters prefer a to b and b to c, then if preferences are transitive,

Accepted Answer

A) they should prefer a to c. 
B) they should prefer c to a. 
C) they should be indifferent between a and c. 
D) it is not always possible to rank voters' preferences between a and c. 
A) they should prefer a to c. 
B) they should prefer c to a. 
C) they should be indifferent between a and c. 
D) it is not always possible to rank voters' preferences between a and c.

Question 16

A tax imposed by a state or local government on retail sales of most products is

Accepted Answer

A) an excise tax. 
B)  a social service tax. 
C) a consumption tax. 
D) a sales tax. 
A) an excise tax. 
B)  a social service tax. 
C) a consumption tax. 
D) a sales tax.

Question 17

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

Accepted Answer

A) regressive. 
B) proportional. 
C) progressive. 
D) There is insufficient information to answer the question. 
A) regressive. 
B) proportional. 
C) progressive. 
D) There is insufficient information to answer the question.

Question 18

One argument advanced in favor of not increasing the income tax on individuals with high income is that

Accepted Answer

A) increasing income tax increases wealth which contributes to increases in GDP. 
B) increasing the income tax on these individuals will reduce economic efficiency. 
C) increasing the income tax affects mostly middle-income and low-income individuals who are already paying heavy income taxes. 
D) not increasing income taxes will discourage corporations from increasing investment. 
A) increasing income tax increases wealth which contributes to increases in GDP. 
B) increasing the income tax on these individuals will reduce economic efficiency. 
C) increasing the income tax affects mostly middle-income and low-income individuals who are already paying heavy income taxes. 
D) not increasing income taxes will discourage corporations from increasing investment.

Question 19

Suppose the government imposes an 8 percent sales tax on clothing items and the tax is levied on sellers.Who pays for the tax in this situation? (Assume that the demand curve is downward sloping and that the supply curve is upward sloping.)

Accepted Answer

A) The tax is borne entirely by the sellers. 
B) The sellers will pass on the entire sales tax to consumers and therefore the consumers bear the tax. 
C) The tax will be borne partly by consumers and partly by sellers. 
D) It is not possible to answer the question without information on price elasticities. 
A) The tax is borne entirely by the sellers. 
B) The sellers will pass on the entire sales tax to consumers and therefore the consumers bear the tax. 
C) The tax will be borne partly by consumers and partly by sellers. 
D) It is not possible to answer the question without information on price elasticities.

Question 20

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.

Accepted Answer

A) True 
 B)False

From 1970 to 2010, the poverty rate in East Asia rose slightly but the level of poverty in sub-Saharan Africa fell dramatically.

If the government is most interested in minimizing excess burden of an excise tax, should it impose the tax on goods that are elastic or on goods that are inelastic?

What is meant by the term "rational ignorance"?

All of the following occur whenever a government taxes a product except

The federal corporate income tax is

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

An average tax rate is calculated as

One result of the public choice model is that most economists believe that

Some individuals seek to use government action to make themselves better off at the expense of others.The actions of these individuals

Figure 18-1 -Refer to Figure 18-1.The sales tax revenue collected by the government is represented by the area

Suppose $1 billion is available in the budget and Congress is considering allocating the funds to one of the following three alternatives: A.subsidies for education B.research on Alzheimer's C.increased border security If voters prefer a to b and b to c, then if preferences are transitive,

A tax imposed by a state or local government on retail sales of most products is

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

One argument advanced in favor of not increasing the income tax on individuals with high income is that

Suppose the government imposes an 8 percent sales tax on clothing items and the tax is levied on sellers.Who pays for the tax in this situation? (Assume that the demand curve is downward sloping and that the supply curve is upward sloping.)

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.

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

From 1970 to 2010, the poverty rate in East Asia rose slightly but the level of poverty in sub-Saharan Africa fell dramatically.

If the government is most interested in minimizing excess burden of an excise tax, should it impose the tax on goods that are elastic or on goods that are inelastic?

What is meant by the term "rational ignorance"?

All of the following occur whenever a government taxes a product except

The federal corporate income tax is

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

An average tax rate is calculated as

One result of the public choice model is that most economists believe that

Some individuals seek to use government action to make themselves better off at the expense of others.The actions of these individuals

Figure 18-1 -Refer to Figure 18-1.The sales tax revenue collected by the government is represented by the area

Suppose $1 billion is available in the budget and Congress is considering allocating the funds to one of the following three alternatives: A.subsidies for education B.research on Alzheimer's C.increased border security If voters prefer a to b and b to c, then if preferences are transitive,

A tax imposed by a state or local government on retail sales of most products is

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

One argument advanced in favor of not increasing the income tax on individuals with high income is that

Suppose the government imposes an 8 percent sales tax on clothing items and the tax is levied on sellers.Who pays for the tax in this situation? (Assume that the demand curve is downward sloping and that the supply curve is upward sloping.)

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.

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