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

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) 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.

Absolute poverty measures vary from country to country.For example,in 2011,the poverty line in the United States for a family of four with two children was an annual income of $22,350 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?

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.

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 consumer's burden of the tax

What is the United States government's formal definition of the poverty line?

Rational ignorance

Table 18-6 Table 18-6 shows income distribution data for two countries. Use this data to answer the following questions. -Refer to Table 18-8. a.Draw a Lorenz curve for each country. b.Which country has the more equal distribution of income? c.Based on the Lorenz curve for the two countries,can you determine which country has the more progressive tax system? Explain your answer.

The public choice model

As the value of the Gini coefficient approaches one,

Under a consumption tax,households

Some economists who use the public choice model to explain the ways government intervenes in the economy believe that regulatory capture results when an agency or commission is given authority over a particular industry or product.Which of the following is the best example of regulatory capture?

Between 1980 and 2011,income inequality in the United States has increased in part due to expanding international trade.How does expanding international trade contribute to income inequality?

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 consumer's burden of the tax

Public schools in the United States get most of their operating funds from

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.

Horizontal equity means that two people in identical economic situations should pay the same amount of taxes.

When the majority of voters have preferences very different from those of the median voter,then the median voter theorem will lead to accurate predictions of the outcomes of elections.

The public choice model asserts that the self-interest of policymakers is likely to cause them to take actions that are inconsistent with the preferences of voters,even where those preferences are clear.

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,

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