Question 1

The Arrow impossibility theorem states that

Accepted Answer

A)  no system of voting can be devised that will always consistently represent the underlying preferences of voters. 
B)  it is impossible for a majority voting system not to consistently represent the preferences of voters. 
C)  it is impossible to separate corporate desires from public bureaucracy. 
D)  no system of voting can be devised that will ensure a 100 percent voter turnout. 
A)  no system of voting can be devised that will always consistently represent the underlying preferences of voters. 
B)  it is impossible for a majority voting system not to consistently represent the preferences of voters. 
C)  it is impossible to separate corporate desires from public bureaucracy. 
D)  no system of voting can be devised that will ensure a 100 percent voter turnout.

Question 2

The Gini coefficient is measured by

Accepted Answer

A)  summing up the cumulative income percentages on the Lorenz curve. 
B)  summing up the total income earned by the population and dividing by the size of the population. 
C)  using the formula: area between perfect inequality and Lorenz curve ÷ area between the line of perfect equality to the Lorenz curve. 
D)  using the formula: area between the line of perfect equality and the Lorenz curve ÷ the area under the line of perfect equality. 
A)  summing up the cumulative income percentages on the Lorenz curve. 
B)  summing up the total income earned by the population and dividing by the size of the population. 
C)  using the formula: area between perfect inequality and Lorenz curve ÷ area between the line of perfect equality to the Lorenz curve. 
D)  using the formula: area between the line of perfect equality and the Lorenz curve ÷ the area under the line of perfect equality.

Question 3

Suppose in an effort to raise tax revenue,the state of Vermont decides to legalize the sale of marijuana.The state will charge a tax of $50 per ounce on each sale,and the state claims that retailers will bear the entire burden of this tax.Draw a graph illustrating the situation where retail outlets would bear the entire tax burden of $50 per ounce of marijuana.Explain what would need to be true about the demand for marijuana for retailers to bear the entire burden of this tax,and if this would likely occur if marijuana sales were actually legalized.

Accepted Answer

For retailers to bear the entire burden

Question 4

If you pay a constant percentage of your taxable income in taxes,the tax is

Accepted Answer

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

Question 5

Is a typical person likely to gather more information when buying a new computer or when voting for a member of the U.S.Senate? Why?

Accepted Answer

The typical person is likely to gather m

Question 6

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

Question 7

Table 18-3
   Table 18-3 shows the amount of taxes paid on various levels of income.
-Refer to Table 18-3.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 8

An example of a payroll tax in the United States is

Accepted Answer

A)  Social Security taxes. 
B)  taxes on corporate profit. 
C)  excise taxes on gasoline. 
D)  property taxes on real estate. 
A)  Social Security taxes. 
B)  taxes on corporate profit. 
C)  excise taxes on gasoline. 
D)  property taxes on real estate.

Question 9

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 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.If the vote is between allocating funds to subsidies for education and research on Alzheimer's,

Accepted Answer

A)  Ivy and Jasmine vote for education subsidies, Rose votes for Alzheimer's research, and education subsidies wins. 
B)  Ivy and Rose vote for education subsidies, Jasmine votes for Alzheimer's research, and education subsidies wins. 
C)  Jasmine and Rose vote for Alzheimer's research, Ivy votes for education subsidies, and Alzheimer's research wins. 
D)  Jasmine and Ivy vote for Alzheimer's research, Rose votes for education subsidies, and Alzheimer's research wins. 
A)  Ivy and Jasmine vote for education subsidies, Rose votes for Alzheimer's research, and education subsidies wins. 
B)  Ivy and Rose vote for education subsidies, Jasmine votes for Alzheimer's research, and education subsidies wins. 
C)  Jasmine and Rose vote for Alzheimer's research, Ivy votes for education subsidies, and Alzheimer's research wins. 
D)  Jasmine and Ivy vote for Alzheimer's research, Rose votes for education subsidies, and Alzheimer's research wins.

Question 11

Explain the effect of price elasticities of supply and demand on tax incidence.

Accepted Answer

If demand is less elastic than

Question 12

What is the poverty rate?

Accepted Answer

A)  the rate at which the number of people relative to the size of the population fall below the poverty line 
B)  the percentage of the population earning an annual income below the poverty line, according to the federal government's definition 
C)  the percentage of working adults whose annual income is sufficiently low as to be are exempt from paying income taxes 
D)  the percentage of households who qualify for government assistance to meet the minimal requirement for adequate nutrition 
A)  the rate at which the number of people relative to the size of the population fall below the poverty line 
B)  the percentage of the population earning an annual income below the poverty line, according to the federal government's definition 
C)  the percentage of working adults whose annual income is sufficiently low as to be are exempt from paying income taxes 
D)  the percentage of households who qualify for government assistance to meet the minimal requirement for adequate nutrition

Question 13

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 14

Why is a typical person likely to gather more information when buying a new car than when voting for a member of Congress?

Accepted Answer

A)  because a person's preferences are more likely to be met with little effort in the political sphere but this is not the case when buying a car in the private marketplace 
B)  because it is less costly to acquire information about consumer items than it is about political candidates 
C)  because buying a new car affects a person more immediately and personally compared to voting for a member of Congress; in the latter, a person's vote is only one of many voters and therefore, not likely to have a large impact on the outcome 
D)  because the effects of buying a car are long term while a member of Congress has a relatively short tenure 
A)  because a person's preferences are more likely to be met with little effort in the political sphere but this is not the case when buying a car in the private marketplace 
B)  because it is less costly to acquire information about consumer items than it is about political candidates 
C)  because buying a new car affects a person more immediately and personally compared to voting for a member of Congress; in the latter, a person's vote is only one of many voters and therefore, not likely to have a large impact on the outcome 
D)  because the effects of buying a car are long term while a member of Congress has a relatively short tenure

Question 15

The voting paradox suggests that the "voting market",as represented by elections,

Accepted Answer

A)  lead to a superior outcome in representing consumer preferences compared to the private market for goods and services. 
B)  may often lead to an inefficient outcome in representing consumer preferences compared to the private market for goods and services. 
C)  is no different from the private market for goods and services in terms of representing consumer preferences. 
D)  may not lead to an efficient outcome but certainly leads to a more equitable outcome in terms of distributing goods and services. 
A)  lead to a superior outcome in representing consumer preferences compared to the private market for goods and services. 
B)  may often lead to an inefficient outcome in representing consumer preferences compared to the private market for goods and services. 
C)  is no different from the private market for goods and services in terms of representing consumer preferences. 
D)  may not lead to an efficient outcome but certainly leads to a more equitable outcome in terms of distributing goods and services.

Question 16

Table 18-4
  
 Table 18-4 shows the income tax brackets and tax rates for single taxpayers in Calpernia.
-Refer to Table 18-4.Calculate the income tax paid by Sasha,a single taxpayer with an income of $60,000.

Accepted Answer

A)  $22,800 
B)  $14,399 
C)  $13,800 
D)  $13,642 
A)  $22,800 
B)  $14,399 
C)  $13,800 
D)  $13,642

Question 17

Between 1980 and 2011,income inequality in the United States has increased in part due to rapid technological change.How does technological change contribute to income inequality?

Accepted Answer

A)  Advancements in technology displace skilled and unskilled workers in certain fields, leading to higher unemployment rates. 
B)  Technology complements the skills of the well-educated while rendering redundant the labor services of unskilled and low-skilled workers. This causes a decline in the wages of low and unskilled workers relative to other workers. 
C)  The opportunity cost of investing in technology is investments in human capital. The resulting decrease in labor's marginal productivity has lead to lower wages. 
D)  Technological change favors the owners of capital and since high income individuals tend to own capital, income inequality is further exacerbated. 
A)  Advancements in technology displace skilled and unskilled workers in certain fields, leading to higher unemployment rates. 
B)  Technology complements the skills of the well-educated while rendering redundant the labor services of unskilled and low-skilled workers. This causes a decline in the wages of low and unskilled workers relative to other workers. 
C)  The opportunity cost of investing in technology is investments in human capital. The resulting decrease in labor's marginal productivity has lead to lower wages. 
D)  Technological change favors the owners of capital and since high income individuals tend to own capital, income inequality is further exacerbated.

Question 18

If the marginal tax rate is greater than the average tax rate,the tax structure is described as regressive.

Accepted Answer

A) True 
 B)False

Question 19

What is regulatory capture?

Accepted Answer

A)  It is a situation in which a policy maker seeks to improve his election prospects by aligning himself with a powerful special interest group which will finance his political campaign. 
B)  It is the exchange of political support between a regulatory agency and the regulated firm resulting in both parties capturing economic rents. 
C)  It is a situation in which a firm being regulated successfully influences the regulatory agency's actions to benefit the interests of the firm, rather than the public interest. 
D)  It is a situation in which a regulatory agency uses its authority to force actions that are not favored by the regulated firms but are in the public's interest. 
A)  It is a situation in which a policy maker seeks to improve his election prospects by aligning himself with a powerful special interest group which will finance his political campaign. 
B)  It is the exchange of political support between a regulatory agency and the regulated firm resulting in both parties capturing economic rents. 
C)  It is a situation in which a firm being regulated successfully influences the regulatory agency's actions to benefit the interests of the firm, rather than the public interest. 
D)  It is a situation in which a regulatory agency uses its authority to force actions that are not favored by the regulated firms but are in the public's interest.

Question 20

One argument advanced in favor of reducing the tax on dividends is that

Accepted Answer

A)  dividends increase the wealth of shareholder's which contribute to increases in GDP. 
B)  reducing the tax on dividends will improve economic efficiency. 
C)  dividends accrue mostly to middle-income and low-income investors who are already paying heavy income taxes. 
D)  the reduction will encourage corporations to plow back retained earning into capital investments. 
A)  dividends increase the wealth of shareholder's which contribute to increases in GDP. 
B)  reducing the tax on dividends will improve economic efficiency. 
C)  dividends accrue mostly to middle-income and low-income investors who are already paying heavy income taxes. 
D)  the reduction will encourage corporations to plow back retained earning into capital investments.

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

The Arrow impossibility theorem states that

The Gini coefficient is measured by

If you pay a constant percentage of your taxable income in taxes,the tax is

Is a typical person likely to gather more information when buying a new computer or when voting for a member of the U.S.Senate? Why?

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.

Table 18-3 Table 18-3 shows the amount of taxes paid on various levels of income. -Refer to Table 18-3.The tax system is

An example of a payroll tax in the United States is

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?

Explain the effect of price elasticities of supply and demand on tax incidence.

What is the poverty rate?

An average tax rate is calculated as

Why is a typical person likely to gather more information when buying a new car than when voting for a member of Congress?

The voting paradox suggests that the "voting market",as represented by elections,

Table 18-4 Table 18-4 shows the income tax brackets and tax rates for single taxpayers in Calpernia. -Refer to Table 18-4.Calculate the income tax paid by Sasha,a single taxpayer with an income of $60,000.

Between 1980 and 2011,income inequality in the United States has increased in part due to rapid technological change.How does technological change contribute to income inequality?

If the marginal tax rate is greater than the average tax rate,the tax structure is described as regressive.

What is regulatory capture?

One argument advanced in favor of reducing the tax on dividends is that

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

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