Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Economists argue that the corporate income tax is an example of a tax with a high deadweight loss because

Accepted Answer

A)  some of the burden of the tax is passed on to consumers in the form of higher prices. 
B)  it discourages corporations from undertaking capital investments to enhance market competitiveness. 
C)  taxing a corporation's income amounts to double taxing the earnings on individual shareholders' investments in corporations. 
D)  it encourages corporations to seek ways to evade taxes. 
A)  some of the burden of the tax is passed on to consumers in the form of higher prices. 
B)  it discourages corporations from undertaking capital investments to enhance market competitiveness. 
C)  taxing a corporation's income amounts to double taxing the earnings on individual shareholders' investments in corporations. 
D)  it encourages corporations to seek ways to evade taxes.

Question 3

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 4

Table 18-4
  
 Table 18-4 shows the income tax brackets and tax rates for single taxpayers in Calpernia.
-Refer to Table 18-4.Sasha is a single taxpayer with an income of $60,000.What is his marginal tax rate and what is his average tax rate?

Accepted Answer

A)  marginal tax rate = 38%; average tax rate = 23% 
B)  marginal tax rate = 17%; average tax rate = 21% 
C)  marginal tax rate = 38%; average tax rate = 24% 
D)  marginal tax rate = 23%; average tax rate = 38% 
A)  marginal tax rate = 38%; average tax rate = 23% 
B)  marginal tax rate = 17%; average tax rate = 21% 
C)  marginal tax rate = 38%; average tax rate = 24% 
D)  marginal tax rate = 23%; average tax rate = 38%

Question 5

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 producer's burden of the tax

Accepted Answer

A)  is Pa - Pd under either supply curve. 
B)  is Pb - Pe under either supply curve. 
C)  is Pa - Pd if the supply curve is S0 and Pb - Pe if the supply curve is S1. 
D)  is Pc - Pd if the supply curve is S0 and Pc - Pe if the supply curve is S1. 
A)  is Pa - Pd under either supply curve. 
B)  is Pb - Pe under either supply curve. 
C)  is Pa - Pd if the supply curve is S0 and Pb - Pe if the supply curve is S1. 
D)  is Pc - Pd if the supply curve is S0 and Pc - Pe if the supply curve is S1.

Question 6

One important difference between the political process and the market process is that

Accepted Answer

A)  the political process results in collective actions in which not everyone is required to participate, while in the market process individuals are obliged to participate. 
B)  the political process results in collective actions in which everyone is obliged to participate, while in the market process individuals are free to participate or not. 
C)  the political process results in collective actions that maximize economic surplus, while the market process may lead to efficiency losses. 
D)  the political process results in collective actions in which everyone is made better off, while the market process results in actions that favor some groups only. 
A)  the political process results in collective actions in which not everyone is required to participate, while in the market process individuals are obliged to participate. 
B)  the political process results in collective actions in which everyone is obliged to participate, while in the market process individuals are free to participate or not. 
C)  the political process results in collective actions that maximize economic surplus, while the market process may lead to efficiency losses. 
D)  the political process results in collective actions in which everyone is made better off, while the market process results in actions that favor some groups only.

Question 7

A situation where a member of Congress votes to approve a bill in exchange for favorable votes from other members on other bills is called

Accepted Answer

A)  rent seeking. 
B)  logrolling. 
C)  regulatory capture. 
D)  special interest legislation. 
A)  rent seeking. 
B)  logrolling. 
C)  regulatory capture. 
D)  special interest legislation.

Question 8

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 9

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,what is the size of the deadweight loss,if there is any?

Accepted Answer

A)  the area adc if the supply curve is S0 and the area bec if the supply curve is S1. 
B)  the area afcd if the supply curve is S0 and the area bfce if the supply curve is S1. 
C)  the area becf under either supply curve. 
D)  There is no deadweight loss; revenue raised is used to fund government projects. 
A)  the area adc if the supply curve is S0 and the area bec if the supply curve is S1. 
B)  the area afcd if the supply curve is S0 and the area bfce if the supply curve is S1. 
C)  the area becf under either supply curve. 
D)  There is no deadweight loss; revenue raised is used to fund government projects.

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 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 11

In the United States,

Accepted Answer

A)  the income tax system has little or no impact on the distribution of income. 
B)  the after-tax income distribution of income is more equal than the before-tax distribution. 
C)  once a person is in poverty, it is very difficult for a person to get out of poverty. 
D)  the degree of income mobility is relatively low. 
A)  the income tax system has little or no impact on the distribution of income. 
B)  the after-tax income distribution of income is more equal than the before-tax distribution. 
C)  once a person is in poverty, it is very difficult for a person to get out of poverty. 
D)  the degree of income mobility is relatively low.

Question 12

Figure 18-5   
Figure 18-5 shows the Lorenz curves for Islandia and Syldavia.
-Refer to Figure 18-5.Which country has the more unequal distribution of income?

Accepted Answer

A)  Islandia 
B)  Syldavia 
C)  They may have the same absolute income distribution although their relative income distribution is different. 
D)  There is insufficient information to answer the question. 
A)  Islandia 
B)  Syldavia 
C)  They may have the same absolute income distribution although their relative income distribution is different. 
D)  There is insufficient information to answer the question.

Question 13

Logrolling may result in

Accepted Answer

A)  legislation that yields economy-wide benefits, the funding for which is borne primarily by a few of the smallest states. 
B)  a majority of Congress supporting legislation that benefits the economic interests of a few, while harming the economic interests of a much larger group. 
C)  members of Congress selling their votes on proposed legislation to the highest bidder. 
D)  creating limited incentives for policymakers to consider the immediate consequences of their proposed legislation. 
A)  legislation that yields economy-wide benefits, the funding for which is borne primarily by a few of the smallest states. 
B)  a majority of Congress supporting legislation that benefits the economic interests of a few, while harming the economic interests of a much larger group. 
C)  members of Congress selling their votes on proposed legislation to the highest bidder. 
D)  creating limited incentives for policymakers to consider the immediate consequences of their proposed legislation.

Question 14

Policymakers focus on marginal tax rate changes when making changes in the tax code because the marginal tax rate

Accepted Answer

A)  determines how tax revenue will change as national income increases. 
B)  affects people's willingness to work, save, and invest. 
C)  always equals the average tax rate which is harder to measure. 
D)  determines how much revenue the government will have to spend. 
A)  determines how tax revenue will change as national income increases. 
B)  affects people's willingness to work, save, and invest. 
C)  always equals the average tax rate which is harder to measure. 
D)  determines how much revenue the government will have to spend.

Question 15

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 16

A marginal tax rate is calculated as

Accepted Answer

A)  total taxable income ÷ by taxes paid. 
B)  taxes paid ÷ total taxable income. 
C)  change in taxes paid ÷ the change in total taxable income. 
D)  change in taxable income ÷ change in taxes paid. 
A)  total taxable income ÷ by taxes paid. 
B)  taxes paid ÷ total taxable income. 
C)  change in taxes paid ÷ the change in total taxable income. 
D)  change in taxable income ÷ change in taxes paid.

Question 17

What is the difference between a marginal tax rate and an average tax rate? Which is more important in determining the impact of the tax system on economic behavior?

Accepted Answer

A marginal tax rate is the fraction of e

Question 18

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 19

A government-imposed tax on soft drinks would shift the ________ curve for soft drinks to the ________,increasing the equilibrium price and decreasing the equilibrium quantity.

Accepted Answer

A)  demand; right 
B)  demand; left 
C)  supply; right 
D)  supply; left 
A)  demand; right 
B)  demand; left 
C)  supply; right 
D)  supply; left

Question 20

Holding all other factors constant,income earned from capital is more unequally distributed than income earned from labor.

Accepted Answer

A) True 
 B)False

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

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

Economists argue that the corporate income tax is an example of a tax with a high deadweight loss because

The federal corporate income tax is

Table 18-4 Table 18-4 shows the income tax brackets and tax rates for single taxpayers in Calpernia. -Refer to Table 18-4.Sasha is a single taxpayer with an income of $60,000.What is his marginal tax rate and what is his average tax rate?

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 producer's burden of the tax

One important difference between the political process and the market process is that

A situation where a member of Congress votes to approve a bill in exchange for favorable votes from other members on other bills is called

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

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,what is the size of the deadweight loss,if there is any?

In the United States,

Figure 18-5 Figure 18-5 shows the Lorenz curves for Islandia and Syldavia. -Refer to Figure 18-5.Which country has the more unequal distribution of income?

Logrolling may result in

Policymakers focus on marginal tax rate changes when making changes in the tax code because the marginal tax rate

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

A marginal tax rate is calculated as

What is the difference between a marginal tax rate and an average tax rate? Which is more important in determining the impact of the tax system on economic behavior?

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

A government-imposed tax on soft drinks would shift the ________ curve for soft drinks to the ________,increasing the equilibrium price and decreasing the equilibrium quantity.

Holding all other factors constant,income earned from capital is more unequally distributed than income earned from labor.

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

A government-imposed tax on soft drinks would shift the curve for soft drinks to the ,increasing the equilibrium price and decreasing the equilibrium quantity.