Question 1

The federal government and some state governments levy taxes on specific goods such as gasoline,cigarettes and beer.These are known as

Accepted Answer

A) sales taxes. 
B) sin taxes. 
C) specific taxes. 
D) excise taxes. 
A) sales taxes. 
B) sin taxes. 
C) specific taxes. 
D) excise taxes.

Question 2

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 3

The federal government defines the poverty line as

Accepted Answer

A) a level of annual income equal to the amount necessary to purchase the minimal quantity of food required for adequate nutrition. 
B) a level of annual income equal to three times the amount of money necessary to purchase the minimal quantity of food required for adequate nutrition. 
C) the average income level of welfare recipients. 
D) an annual income of $11,800 for a family of four in 2011. 
A) a level of annual income equal to the amount necessary to purchase the minimal quantity of food required for adequate nutrition. 
B) a level of annual income equal to three times the amount of money necessary to purchase the minimal quantity of food required for adequate nutrition. 
C) the average income level of welfare recipients. 
D) an annual income of $11,800 for a family of four in 2011.

Question 4

How would the elimination of a sales tax affect the market for a product that had been subject to the tax?

Accepted Answer

A) The demand for the product would rise and the equilibrium price would fall by the amount of the tax. 
B) The equilibrium price for the product would fall by less than the amount of the tax. 
C) The reduction in government revenue from the tax would be made up by an increase in property taxes. 
D) The supply of the product would become more elastic. 
A) The demand for the product would rise and the equilibrium price would fall by the amount of the tax. 
B) The equilibrium price for the product would fall by less than the amount of the tax. 
C) The reduction in government revenue from the tax would be made up by an increase in property taxes. 
D) The supply of the product would become more elastic.

Question 5

The term tax incidence refers to

Accepted Answer

A) the degree of progression of a tax. 
B) the actual division of the burden of a tax between buyers and sellers in a market. 
C) the amount of revenue government collects from a tax imposed on a good or service. 
D) whether the burden of a tax rests more heavily on those with higher incomes or those with lower incomes. 
A) the degree of progression of a tax. 
B) the actual division of the burden of a tax between buyers and sellers in a market. 
C) the amount of revenue government collects from a tax imposed on a good or service. 
D) whether the burden of a tax rests more heavily on those with higher incomes or those with lower incomes.

Question 6

Which of the following is a transfer payment?

Accepted Answer

A) the food stamp program 
B) a tax deduction 
C) Social Security payments 
D) an income tax credit 
A) the food stamp program 
B) a tax deduction 
C) Social Security payments 
D) an income tax credit

Question 7

The Gini coefficient for the United States in 1980 was 0.403.In 2011,the coefficient was equal to 0.468.This means that

Accepted Answer

A) per capita income in the United States rose from 1980 to 2011. 
B) there was a decrease in the amount of government transfer payments from 1980 to 2011. 
C) cuts in federal income tax rates in the early 1980s and 2001 helped to reduce income inequality. 
D) income inequality increased from 1980 to 2011. 
A) per capita income in the United States rose from 1980 to 2011. 
B) there was a decrease in the amount of government transfer payments from 1980 to 2011. 
C) cuts in federal income tax rates in the early 1980s and 2001 helped to reduce income inequality. 
D) income inequality increased from 1980 to 2011.

Question 8

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 9

The person or firm that pays a tax bears the burden of the tax.

Accepted Answer

A) True 
 B)False

Question 10

The median voter theorem states that the outcome of a majority vote is likely to represent the preferences of the voter who is in the political middle.

Accepted Answer

A) True 
 B)False

Question 11

A Gini coefficient of ________ means that an income distribution is perfectly equal and a Gini coefficient of ________ means the income distribution is perfectly unequal.

Accepted Answer

A) 0; 1 
B) 1; 0 
C) 0,100 
D) 100,0 
A) 0; 1 
B) 1; 0 
C) 0,100 
D) 100,0

Question 12

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 13

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 14

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 15

What is the term that explains why voters often lack knowledge of pending legislation,and lack knowledge of the views of candidates for office on a range of issues that affect their own (the voters')welfare?

Accepted Answer

A) the voting paradox 
B) logrolling 
C) rational ignorance 
D) regulatory capture 
A) the voting paradox 
B) logrolling 
C) rational ignorance 
D) regulatory capture

Question 16

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 17

The public choice model assumes that government policy makers

Accepted Answer

A) must promote the public interest at the expense of their own self-interests in order to be re-elected. 
B) will pursue their self-interests in personal affairs but only if it does not conflict with the public interest. 
C) will often act irrationally in their personal affairs,but will act rationally when they promote the public interest. 
D) are likely to pursue their own self-interests,even if their self-interests conflict with the public interest. 
A) must promote the public interest at the expense of their own self-interests in order to be re-elected. 
B) will pursue their self-interests in personal affairs but only if it does not conflict with the public interest. 
C) will often act irrationally in their personal affairs,but will act rationally when they promote the public interest. 
D) are likely to pursue their own self-interests,even if their self-interests conflict with the public interest.

Question 18

What is meant by "tax incidence"?

Accepted Answer

Tax incidence refers to the ac

Question 19

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 20

"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.

The federal government and some state governments levy taxes on specific goods such as gasoline,cigarettes and beer.These are known as

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.

The federal government defines the poverty line as

How would the elimination of a sales tax affect the market for a product that had been subject to the tax?

The term tax incidence refers to

Which of the following is a transfer payment?

The Gini coefficient for the United States in 1980 was 0.403.In 2011,the coefficient was equal to 0.468.This means that

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

The person or firm that pays a tax bears the burden of the tax.

The median voter theorem states that the outcome of a majority vote is likely to represent the preferences of the voter who is in the political middle.

A Gini coefficient of means that an income distribution is perfectly equal and a Gini coefficient of means the income distribution is perfectly unequal.

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

The Arrow impossibility theorem explains

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

What is the term that explains why voters often lack knowledge of pending legislation,and lack knowledge of the views of candidates for office on a range of issues that affect their own (the voters')welfare?

The public choice model assumes that government policy makers

What is meant by "tax incidence"?

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?

"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

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 federal government and some state governments levy taxes on specific goods such as gasoline,cigarettes and beer.These are known as

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.

The federal government defines the poverty line as

How would the elimination of a sales tax affect the market for a product that had been subject to the tax?

The term tax incidence refers to

Which of the following is a transfer payment?

The Gini coefficient for the United States in 1980 was 0.403.In 2011,the coefficient was equal to 0.468.This means that

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

The person or firm that pays a tax bears the burden of the tax.

The median voter theorem states that the outcome of a majority vote is likely to represent the preferences of the voter who is in the political middle.

A Gini coefficient of ________ means that an income distribution is perfectly equal and a Gini coefficient of ________ means the income distribution is perfectly unequal.

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

The Arrow impossibility theorem explains

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

What is the term that explains why voters often lack knowledge of pending legislation,and lack knowledge of the views of candidates for office on a range of issues that affect their own (the voters')welfare?

The public choice model assumes that government policy makers

What is meant by "tax incidence"?

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?

"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

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

A Gini coefficient of means that an income distribution is perfectly equal and a Gini coefficient of means the income distribution is perfectly unequal.