Question 1

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 2

Exempting food purchases from sales tax is consistent with the ability-to-pay principle, although not necessarily consistent with vertical equity.

Accepted Answer

A) True 
 B)False

Question 3

If official poverty statistics for the United States included transfer payments individuals receive from the government, such as Social Security payments and other non-cash benefits such as food stamps,

Accepted Answer

A)  the poverty rate would be lower. 
B)  poverty would be eliminated. 
C)  income inequality would be greater. 
D)  the poverty rate would be overstated. 
A)  the poverty rate would be lower. 
B)  poverty would be eliminated. 
C)  income inequality would be greater. 
D)  the poverty rate would be overstated.

Question 4

Rapid economic growth tends to increase the degree of income mobility.

Accepted Answer

A) True 
 B)False

Question 5

Table 18-5
   Table 18-5 shows the amount of taxes paid on various levels of income.
-Refer to Table 18-5. 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)  regressive between $20,000 and $25,000 of income and progressive between $32,000 and $42,000. 
A)  progressive throughout all levels of income. 
B)  proportional throughout all levels of income. 
C)  regressive throughout all levels of income. 
D)  regressive between $20,000 and $25,000 of income and progressive between $32,000 and $42,000.

Question 6

Figure 18-3  
-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 7

According to the benefits-received principle, those who receive the benefits from a government program should pay the taxes that support the program.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

In deciding which taxes to use, a govern

Question 9

The idea that two taxpayers in the same economic circumstances should pay the same level of taxes is known as the

Accepted Answer

A)  ability-to-pay principle. 
B)  vertical-equity principle. 
C)  horizontal-equity principle. 
D)  benefits-received principle. 
A)  ability-to-pay principle. 
B)  vertical-equity principle. 
C)  horizontal-equity principle. 
D)  benefits-received principle.

Question 10

Figure 18-1  
-Refer to Figure 18-1. Of the tax revenue collected by the government, the portion borne by consumers 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 11

Unlike the market process, in the political market it is possible for some individuals to receive very large benefits from the political process without any significant impact on their tax bills.

Accepted Answer

A) True 
 B)False

Question 12

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 13

Tax laws affect

Accepted Answer

A)  economic efficiency but not equity. 
B)  equity but not economic efficiency. 
C)  consumption and production, not efficiency and equity. 
D)  both efficiency and equity. 
A)  economic efficiency but not equity. 
B)  equity but not economic efficiency. 
C)  consumption and production, not efficiency and equity. 
D)  both efficiency and equity.

Question 14

The "ability-to-pay" principle of taxation is the normative idea that

Accepted Answer

A)  an equitable tax system is one in which high income individuals should bear a greater burden of taxes than low income individuals. 
B)  each individual should voluntarily contribute according to her ability to pay taxes. 
C)  progressive taxes are more equitable than regressive taxes. 
D)  two individuals earning the same income should have equal ability to pay, all else constant. 
A)  an equitable tax system is one in which high income individuals should bear a greater burden of taxes than low income individuals. 
B)  each individual should voluntarily contribute according to her ability to pay taxes. 
C)  progressive taxes are more equitable than regressive taxes. 
D)  two individuals earning the same income should have equal ability to pay, all else constant.

Question 15

Measures of poverty (for example, the poverty line) and the distribution of income (for example, the Lorenz curve and the Gini coefficient) are misleading for which of the following two reasons?

Accepted Answer

A)  First, these measures do not take into account income mobility over time. Second, these measures ignore the effects of government programs meant to reduce poverty. 
B)  First, none of these measures are adjusted for inflation. Second, they do not measure income on a per capita basis. 
C)  First, these measures fail to include the income U.S. citizens earn working for foreign firms that have operations located in the United States. Second, these measures fail to include income foreign citizens earn working for U.S. firms that have operations in foreign countries. 
D)  First, these measures fail to include dividend and interest income earned on stocks and bonds. Second, these measures fail to include the value of goods and services citizens make for their own consumption that are not sold in markets. 
A)  First, these measures do not take into account income mobility over time. Second, these measures ignore the effects of government programs meant to reduce poverty. 
B)  First, none of these measures are adjusted for inflation. Second, they do not measure income on a per capita basis. 
C)  First, these measures fail to include the income U.S. citizens earn working for foreign firms that have operations located in the United States. Second, these measures fail to include income foreign citizens earn working for U.S. firms that have operations in foreign countries. 
D)  First, these measures fail to include dividend and interest income earned on stocks and bonds. Second, these measures fail to include the value of goods and services citizens make for their own consumption that are not sold in markets.

Question 16

Which of the following statements about the distribution of income in the United States is true?

Accepted Answer

A)  The United States has the most unequal distribution of income of any high-income country in the world. 
B)  The United States has a more unequal distribution of income than Bolivia and Botswana. 
C)  The distribution of income in the United States is fairly equal and there have been no dramatic changes over time. 
D)  The distribution of income in the United States is unequal and has become significantly more unequal over time. 
A)  The United States has the most unequal distribution of income of any high-income country in the world. 
B)  The United States has a more unequal distribution of income than Bolivia and Botswana. 
C)  The distribution of income in the United States is fairly equal and there have been no dramatic changes over time. 
D)  The distribution of income in the United States is unequal and has become significantly more unequal over time.

Question 17

Define logrolling. Explain why logrolling often results in legislation that benefits the economic interests of a few, while harming the interests of a larger group of people.

Accepted Answer

Logrolling refers to the situation where

Question 18

Former Alabama Governor George Wallace ran for president several times, once as a third-party candidate in 1968. Wallace claimed there was "not a dime's worth of difference" between the Democratic and Republican parties during one of his campaigns. How does Wallace's comment relate to the median voter theorem?

Accepted Answer

To win his party's nomination for presid

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 deadweight loss from the imposition of a tax is smaller if demand is more elastic.

Accepted Answer

A) True 
 B)False

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

According to the horizontal-equity principle of taxation,

Exempting food purchases from sales tax is consistent with the ability-to-pay principle, although not necessarily consistent with vertical equity.

If official poverty statistics for the United States included transfer payments individuals receive from the government, such as Social Security payments and other non-cash benefits such as food stamps,

Rapid economic growth tends to increase the degree of income mobility.

Table 18-5 Table 18-5 shows the amount of taxes paid on various levels of income. -Refer to Table 18-5. The tax system is

According to the benefits-received principle, those who receive the benefits from a government program should pay the taxes that support the program.

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

The idea that two taxpayers in the same economic circumstances should pay the same level of taxes is known as the

Figure 18-1 -Refer to Figure 18-1. Of the tax revenue collected by the government, the portion borne by consumers is represented by the area

Unlike the market process, in the political market it is possible for some individuals to receive very large benefits from the political process without any significant impact on their tax bills.

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

Tax laws affect

The "ability-to-pay" principle of taxation is the normative idea that

Measures of poverty (for example, the poverty line) and the distribution of income (for example, the Lorenz curve and the Gini coefficient) are misleading for which of the following two reasons?

Which of the following statements about the distribution of income in the United States is true?

Define logrolling. Explain why logrolling often results in legislation that benefits the economic interests of a few, while harming the interests of a larger group of people.

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 deadweight loss from the imposition of a tax is smaller if demand is more elastic.

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

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters