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

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 3

In the United States,the federal income tax is an example of a

Accepted Answer

A)  progressive tax. 
B)  regressive tax. 
C)  proportional tax. 
D)  flat tax. 
A)  progressive tax. 
B)  regressive tax. 
C)  proportional tax. 
D)  flat tax.

Question 4

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 5

Figure 18-7   Figure 18-7 shows the Lorenz curve for a hypothetical country.
-Refer to Figure 18-7.The second lowest 20 percent of households

Accepted Answer

A)  earn 12 percent of the society's total income. 
B)  earn 16 percent of the society's total income. 
C)  earn 28 percent of the society's total income. 
D)  earn 40 percent of the society's total income. 
A)  earn 12 percent of the society's total income. 
B)  earn 16 percent of the society's total income. 
C)  earn 28 percent of the society's total income. 
D)  earn 40 percent of the society's total income.

Question 6

Table 18-12
   Table 18-12 shows income distribution data for two countries. Use this data to answer the following questions.
-Refer to Table 18-12.
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.

Accepted Answer

a.See diagram below. @#IMG-DLM& b.Urbana

Question 7

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 8

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 9

Which of the following statements best represents the opinion of many economists regarding the impact that changes in tax laws have had on recent changes in income inequality in the United States?

Accepted Answer

A)  Reductions in income tax rates have favored high-income individuals more than low-income individuals. As a result, reductions in federal income tax rates have led to more income inequality. 
B)  Reductions in income tax rates have created greater incentives for low-income individuals to work, save and invest. As a result, reductions in federal income tax rates have led to less income inequality. 
C)  Reductions in income tax rates probably have had little impact on the distribution of income. 
D)  Reductions in income tax rates have been offset by increases in corporate income tax rates and payroll taxes. As a result, greater income inequality in the 1990s has been followed by a more equal distribution of income since 2001. 
A)  Reductions in income tax rates have favored high-income individuals more than low-income individuals. As a result, reductions in federal income tax rates have led to more income inequality. 
B)  Reductions in income tax rates have created greater incentives for low-income individuals to work, save and invest. As a result, reductions in federal income tax rates have led to less income inequality. 
C)  Reductions in income tax rates probably have had little impact on the distribution of income. 
D)  Reductions in income tax rates have been offset by increases in corporate income tax rates and payroll taxes. As a result, greater income inequality in the 1990s has been followed by a more equal distribution of income since 2001.

Question 10

Table 18-4
  
-Refer to Table 18-4.The table above outlines the rankings of three members of the U.S.House of Representatives on three spending alternatives.Assume that Congress can spend additional revenue on only one of the three spending alternatives and that Tom,Dick and Harriet,all members of the House of Representatives,participate in a series of votes in which they are to determine which of the spending alternatives should receive funding.Three votes will be taken: (1)Foreign Aid and Post-Secondary Education (2)Foreign Aid and Roads and Bridges and (3)Post-Secondary Education and Roads and Bridges.
Determine whether the voting paradox will occur as a result of these votes.

Accepted Answer

The answer of Table 18-4
  
-Refer to Table 18-4.The...

Question 11

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 greater under the more elastic supply curve S0. 
B)  is greater under the less elastic supply curve S0. 
C)  is greater under the less elastic supply curve S1. 
D)  is the same under either supply curve because there is a single demand curve that captures buyers' market behavior. 
A)  is greater under the more elastic supply curve S0. 
B)  is greater under the less elastic supply curve S0. 
C)  is greater under the less elastic supply curve S1. 
D)  is the same under either supply curve because there is a single demand curve that captures buyers' market behavior.

Question 12

According to the benefits-received principle of taxation

Accepted Answer

A)  individuals who receive the benefits from a government program should pay the taxes that support the program. 
B)  because high income individuals receive the most benefits from government programs, they should pay more taxes than lower income individuals. 
C)  people in the same economic situation should bear an equal share of the tax burden. 
D)  the benefits of government programs such as national defense are shared equally by all people; therefore, the burden of paying for these programs should be shared equally. 
A)  individuals who receive the benefits from a government program should pay the taxes that support the program. 
B)  because high income individuals receive the most benefits from government programs, they should pay more taxes than lower income individuals. 
C)  people in the same economic situation should bear an equal share of the tax burden. 
D)  the benefits of government programs such as national defense are shared equally by all people; therefore, the burden of paying for these programs should be shared equally.

Question 13

Suppose the United States has a Gini coefficient of 0.4 and Sweden has a Gini coefficient of 0.25.Which of the following statements is true?

Accepted Answer

A)  The distribution of income is more equal in the United States. 
B)  The distribution of income is more equal in the Sweden. 
C)  Income distribution is changing faster in the United States. 
D)  Without information on population, it is not possible to compare income distribution between countries. 
A)  The distribution of income is more equal in the United States. 
B)  The distribution of income is more equal in the Sweden. 
C)  Income distribution is changing faster in the United States. 
D)  Without information on population, it is not possible to compare income distribution between countries.

Question 14

What is rent seeking and how is it related to regulatory capture?

Accepted Answer

Rent seeking is the attempt by individua

Question 15

The largest source of tax revenue for state and local governments in the United States in 2012 was

Accepted Answer

A)  sales taxes. 
B)  the corporate income tax. 
C)  the property tax. 
D)  the individual income tax. 
A)  sales taxes. 
B)  the corporate income tax. 
C)  the property tax. 
D)  the individual income tax.

Question 16

Which of the following is the largest source of revenue for the U.S.federal government?

Accepted Answer

A)  the individual income tax 
B)  social insurance taxes 
C)  sales taxes 
D)  property taxes 
A)  the individual income tax 
B)  social insurance taxes 
C)  sales taxes 
D)  property taxes

Question 17

Income inequality in the United States has increased somewhat over the past 25 years.Two factors that appear to have contributed to this are

Accepted Answer

A)  tax cuts on high income individuals and large increases in prices of stocks. 
B)  strong economic growth and low inflation. 
C)  rapid technological change and expanding international trade. 
D)  outsourcing of jobs by U.S. firms and cuts in taxes on capital gains. 
A)  tax cuts on high income individuals and large increases in prices of stocks. 
B)  strong economic growth and low inflation. 
C)  rapid technological change and expanding international trade. 
D)  outsourcing of jobs by U.S. firms and cuts in taxes on capital gains.

Question 18

Which of the following is an example of rent seeking behavior?

Accepted Answer

A)  Apple earned large profits from the development and sale of the iPhone. 
B)  Amazon introduced the Kindle to compete with Sony's Digital Reader. Amazon was motivated by the desire to earn profits from the Kindle but also increased the choice of digital music players available to consumers. 
C)  U.S. sugar firms convinced Congress to impose a quota on imports of sugar. 
D)  Recent increases in cigarette taxes faced little opposition from voters, many of whom were rationally ignorant with respect to the tax. 
A)  Apple earned large profits from the development and sale of the iPhone. 
B)  Amazon introduced the Kindle to compete with Sony's Digital Reader. Amazon was motivated by the desire to earn profits from the Kindle but also increased the choice of digital music players available to consumers. 
C)  U.S. sugar firms convinced Congress to impose a quota on imports of sugar. 
D)  Recent increases in cigarette taxes faced little opposition from voters, many of whom were rationally ignorant with respect to the tax.

Question 19

Figure 18-1  
-Refer to Figure 18-1.Area B+C represents

Accepted Answer

A)  the portion of sales tax revenue borne by consumers. 
B)  the portion of sales tax revenue borne by producers. 
C)  the excess burden of the sales tax. 
D)  sales tax revenue collected by the government. 
A)  the portion of sales tax revenue borne by consumers. 
B)  the portion of sales tax revenue borne by producers. 
C)  the excess burden of the sales tax. 
D)  sales tax revenue collected by the government.

Question 20

What is meant by the term "rational ignorance"?

Accepted Answer

A)  It refers to the absence of a negative incentive, for example, a fine for not voting, which results in a low voter turnout. 
B)  It refers to a situation where one policymaker deliberately approves a bill he does not support in exchange for a future favorable vote for his own cause. 
C)  It means the lack an economic incentive for voters to become informed about a pending legislation. 
D)  It refers to the fact that policymakers and their constituents have different ideas of what it means to behave rationally and each party deliberately ignores the other's view. 
A)  It refers to the absence of a negative incentive, for example, a fine for not voting, which results in a low voter turnout. 
B)  It refers to a situation where one policymaker deliberately approves a bill he does not support in exchange for a future favorable vote for his own cause. 
C)  It means the lack an economic incentive for voters to become informed about a pending legislation. 
D)  It refers to the fact that policymakers and their constituents have different ideas of what it means to behave rationally and each party deliberately ignores the other's view.

According to the horizontal-equity principle of taxation

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

In the United States,the federal income tax is an example of a

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

Figure 18-7 Figure 18-7 shows the Lorenz curve for a hypothetical country. -Refer to Figure 18-7.The second lowest 20 percent of households

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?

What is the poverty rate?

Which of the following statements best represents the opinion of many economists regarding the impact that changes in tax laws have had on recent changes in income inequality in the United States?

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

According to the benefits-received principle of taxation

Suppose the United States has a Gini coefficient of 0.4 and Sweden has a Gini coefficient of 0.25.Which of the following statements is true?

What is rent seeking and how is it related to regulatory capture?

The largest source of tax revenue for state and local governments in the United States in 2012 was

Which of the following is the largest source of revenue for the U.S.federal government?

Income inequality in the United States has increased somewhat over the past 25 years.Two factors that appear to have contributed to this are

Which of the following is an example of rent seeking behavior?

Figure 18-1 -Refer to Figure 18-1.Area B+C represents

What is meant by the term "rational ignorance"?

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

According to the horizontal-equity principle of taxation

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

In the United States,the federal income tax is an example of a

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

Figure 18-7 Figure 18-7 shows the Lorenz curve for a hypothetical country. -Refer to Figure 18-7.The second lowest 20 percent of households

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?

What is the poverty rate?

Which of the following statements best represents the opinion of many economists regarding the impact that changes in tax laws have had on recent changes in income inequality in the United States?

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

According to the benefits-received principle of taxation

Suppose the United States has a Gini coefficient of 0.4 and Sweden has a Gini coefficient of 0.25.Which of the following statements is true?

What is rent seeking and how is it related to regulatory capture?

The largest source of tax revenue for state and local governments in the United States in 2012 was

Which of the following is the largest source of revenue for the U.S.federal government?

Income inequality in the United States has increased somewhat over the past 25 years.Two factors that appear to have contributed to this are

Which of the following is an example of rent seeking behavior?

Figure 18-1 -Refer to Figure 18-1.Area B+C represents

What is meant by the term "rational ignorance"?

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