Question 1

Rational ignorance

Accepted Answer

A)  explains why consumers ignore sunk costs when they vote. 
B)  explains the Arrow impossibility theorem. 
C)  refers to attempts by special interests to use government action to make themselves better off at the expense of others. 
D)  helps to explain why rent seeking by special interest groups occurs. 
A)  explains why consumers ignore sunk costs when they vote. 
B)  explains the Arrow impossibility theorem. 
C)  refers to attempts by special interests to use government action to make themselves better off at the expense of others. 
D)  helps to explain why rent seeking by special interest groups occurs.

Question 2

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 3

Describe the main factors economists believe cause inequality of income.

Accepted Answer

The distribution of income is based main

Question 4

Congressman Flack votes for a program that will benefit the constituents of Congressman Walpole.Which of the following explanations for Flack's vote is most consistent with the public choice model?

Accepted Answer

A)  Congressman Flack did not have time to read and understand all of the legislation he voted on. Members of Congress often depend on their staffs to read proposed legislation and recommend how they should vote. 
B)  Legislators such as Congressman Flack are similar to other decision-makers in that they sometimes make irrational choices. 
C)  Congressman Flack will support programs of legislators from his own party, regardless of who benefits from these programs. 
D)  Congressman Flack expects Congressman Walpole's support for programs that will benefit Flack's constituents. 
A)  Congressman Flack did not have time to read and understand all of the legislation he voted on. Members of Congress often depend on their staffs to read proposed legislation and recommend how they should vote. 
B)  Legislators such as Congressman Flack are similar to other decision-makers in that they sometimes make irrational choices. 
C)  Congressman Flack will support programs of legislators from his own party, regardless of who benefits from these programs. 
D)  Congressman Flack expects Congressman Walpole's support for programs that will benefit Flack's constituents.

Question 5

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,

Accepted Answer

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. 
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.

Question 6

The complexity of the U.S.federal income tax system results in significant annual deadweight losses.The opportunity cost of the hours taxpayers spend on record keeping and completing their tax returns amounts to billions of dollars.
a. If the tax system was simplified,how would this benefit the economy?
b. Why hasn't the tax system been simplified?

Accepted Answer

a. Reducing the time and effort now requ

Question 7

Which of the following statements concerning the federal corporate income tax is true?

Accepted Answer

A)  It is an efficient tax because it imposes a small excess burden relative to the tax revenue it raises. 
B)  The incidence of the corporate income tax can be determined by using demand and supply analysis. 
C)  Determining the incidence of the corporate income tax is complicated because it is not certain how corporations respond to the tax. 
D)  The corporate income tax is an example of the benefits-received principle. 
A)  It is an efficient tax because it imposes a small excess burden relative to the tax revenue it raises. 
B)  The incidence of the corporate income tax can be determined by using demand and supply analysis. 
C)  Determining the incidence of the corporate income tax is complicated because it is not certain how corporations respond to the tax. 
D)  The corporate income tax is an example of the benefits-received principle.

Question 8

For a given supply curve,how does the elasticity of demand affect the burden of a tax imposed on a product?

Accepted Answer

A)  The excess burden of the tax will be minimized when the demand is unit-elastic. 
B)  The excess burden of the tax will be greater when the elasticity of supply is greater than the elasticity of demand. 
C)  The excess burden of the tax will be greater when the demand is less elastic than when it is more elastic. 
D)  The excess burden of the tax will be greater when the demand is more elastic than when it is less elastic. 
A)  The excess burden of the tax will be minimized when the demand is unit-elastic. 
B)  The excess burden of the tax will be greater when the elasticity of supply is greater than the elasticity of demand. 
C)  The excess burden of the tax will be greater when the demand is less elastic than when it is more elastic. 
D)  The excess burden of the tax will be greater when the demand is more elastic than when it is less elastic.

Question 9

When the demand for a product is less elastic than the supply,consumers pay the majority of the tax on the product.

Accepted Answer

A) True 
 B)False

Question 10

The federal government and some state governments levy taxes on specific goods such as gasoline,cigarettes and beer.These are known as

Accepted Answer

A)  sales taxes. 
B)  sin taxes. 
C)  specific taxes. 
D)  excise taxes. 
A)  sales taxes. 
B)  sin taxes. 
C)  specific taxes. 
D)  excise taxes.

Question 11

If the Gini coefficient for Cartland is 1,it means that income distribution is perfectly equal in this society.

Accepted Answer

A) True 
 B)False

Question 12

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 13

Absolute poverty measures vary from country to country.For example,in 2013,the poverty line in the United States for a family of four with two children was an annual income of $23,550 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?

Accepted Answer

A)  by comparing the percentage of households living below the poverty line to the total population 
B)  by comparing a household's income to the income required to maintain the average standard of living in a society at a particular time 
C)  by comparing the amount of goods and services that a household's income can purchase to an objective measure of the amount of income needed to sustain a certain predetermined standard of living 
D)  by comparing the amount of goods and services that a household's income can purchase in one country to the amount of goods and services that a household's income can purchase in another country of comparable living standard 
A)  by comparing the percentage of households living below the poverty line to the total population 
B)  by comparing a household's income to the income required to maintain the average standard of living in a society at a particular time 
C)  by comparing the amount of goods and services that a household's income can purchase to an objective measure of the amount of income needed to sustain a certain predetermined standard of living 
D)  by comparing the amount of goods and services that a household's income can purchase in one country to the amount of goods and services that a household's income can purchase in another country of comparable living standard

Question 14

"Sin taxes," such as taxes on alcoholic beverages,are intended to

Accepted Answer

A)  increase the amount of the products supplied. 
B)  generate money to subsidize production of the products taxed. 
C)  reduce the quantity demanded. 
D)  generate funds to aid in the medical care of those harmed by the product. 
A)  increase the amount of the products supplied. 
B)  generate money to subsidize production of the products taxed. 
C)  reduce the quantity demanded. 
D)  generate funds to aid in the medical care of those harmed by the product.

Question 15

Figure 18-5   Figure 18-5 shows the Lorenz curve for a hypothetical country.
-Refer to Figure 18-5.The highest 20 percent of households

Accepted Answer

A)  earn 24 percent of the society's total income. 
B)  earn 28 percent of the society's total income. 
C)  earn 42 percent of the society's total income. 
D)  earn 72 percent of the society's total income. 
A)  earn 24 percent of the society's total income. 
B)  earn 28 percent of the society's total income. 
C)  earn 42 percent of the society's total income. 
D)  earn 72 percent of the society's total income.

Question 16

According to the ability-to-pay principle of taxation

Accepted Answer

A)  individuals who receive the benefit of a good or service should bear a greater share of the tax burden. 
B)  it is fair to expect a greater share of the tax burden to be borne by people who have a greater ability to pay. 
C)  people in the same economic situation should bear an equal share of the tax burden. 
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 benefit of a good or service should bear a greater share of the tax burden. 
B)  it is fair to expect a greater share of the tax burden to be borne by people who have a greater ability to pay. 
C)  people in the same economic situation should bear an equal share of the tax burden. 
D)  individuals who are willing to bear a greater share of the tax burden should be compensated with non-monetary benefits.

Question 17

Which of the following is not one of the concerns of some policymakers and economists that the increase in the share of income earned by the 1 percent is damaging to the country?

Accepted Answer

A)  The higher incomes of the 1 percent may give them disproportionate political influence through campaign contributions. 
B)  Countries with high levels of income inequality have lower growth rates than do countries with more equal distributions of income. 
C)  further increases in marginal tax rates may reduce work, saving, and investment, thereby reducing economic growth. 
D)  Rising income inequality can lead to political unrest. 
A)  The higher incomes of the 1 percent may give them disproportionate political influence through campaign contributions. 
B)  Countries with high levels of income inequality have lower growth rates than do countries with more equal distributions of income. 
C)  further increases in marginal tax rates may reduce work, saving, and investment, thereby reducing economic growth. 
D)  Rising income inequality can lead to political unrest.

Question 18

The public choice model

Accepted Answer

A)  examines the degree of market power that the public exerts in a market economy. 
B)  examines the public's role in appointing politicians and ensuring that elected officials act in ways to reflect the public's preferences. 
C)  applies economic analysis to government decision making. 
D)  applies economic analysis to the collective decision making of consumers. 
A)  examines the degree of market power that the public exerts in a market economy. 
B)  examines the public's role in appointing politicians and ensuring that elected officials act in ways to reflect the public's preferences. 
C)  applies economic analysis to government decision making. 
D)  applies economic analysis to the collective decision making of consumers.

Question 19

The largest percentage of federal income tax revenue in the United States is paid by the

Accepted Answer

A)  lowest income taxpayers. 
B)  middle income taxpayers. 
C)  highest income taxpayers. 
D)  All groups of taxpayers-low income, high income and middle income-pay the same percent of federal income taxes. 
A)  lowest income taxpayers. 
B)  middle income taxpayers. 
C)  highest income taxpayers. 
D)  All groups of taxpayers-low income, high income and middle income-pay the same percent of federal income taxes.

Question 20

Both presidents Kennedy and Reagan proposed significant cuts in income taxes.Opponents of these tax cut proposals argued that

Accepted Answer

A)  the tax cuts would benefit high-income taxpayers. 
B)  cutting state sales taxes, rather than federal income taxes, would result in greater economic efficiency. 
C)  while the tax cuts would result in greater economic efficiency, there was too much opposition to the tax cuts in Congress. As it turned out, Congress ultimately approved both tax cut proposals. 
D)  it would be better to cut taxes on corporate profits. 
A)  the tax cuts would benefit high-income taxpayers. 
B)  cutting state sales taxes, rather than federal income taxes, would result in greater economic efficiency. 
C)  while the tax cuts would result in greater economic efficiency, there was too much opposition to the tax cuts in Congress. As it turned out, Congress ultimately approved both tax cut proposals. 
D)  it would be better to cut taxes on corporate profits.

Rational ignorance

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

Describe the main factors economists believe cause inequality of income.

Congressman Flack votes for a program that will benefit the constituents of Congressman Walpole.Which of the following explanations for Flack's vote is most consistent with the public choice model?

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,

Which of the following statements concerning the federal corporate income tax is true?

For a given supply curve,how does the elasticity of demand affect the burden of a tax imposed on a product?

When the demand for a product is less elastic than the supply,consumers pay the majority of the tax on the product.

The federal government and some state governments levy taxes on specific goods such as gasoline,cigarettes and beer.These are known as

If the Gini coefficient for Cartland is 1,it means that income distribution is perfectly equal in this society.

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

"Sin taxes," such as taxes on alcoholic beverages,are intended to

Figure 18-5 Figure 18-5 shows the Lorenz curve for a hypothetical country. -Refer to Figure 18-5.The highest 20 percent of households

According to the ability-to-pay principle of taxation

Which of the following is not one of the concerns of some policymakers and economists that the increase in the share of income earned by the 1 percent is damaging to the country?

The public choice model

The largest percentage of federal income tax revenue in the United States is paid by the

Both presidents Kennedy and Reagan proposed significant cuts in income taxes.Opponents of these tax cut proposals argued 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

Filters

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

Rational ignorance

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

Describe the main factors economists believe cause inequality of income.

Congressman Flack votes for a program that will benefit the constituents of Congressman Walpole.Which of the following explanations for Flack's vote is most consistent with the public choice model?

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,

Which of the following statements concerning the federal corporate income tax is true?

For a given supply curve,how does the elasticity of demand affect the burden of a tax imposed on a product?

When the demand for a product is less elastic than the supply,consumers pay the majority of the tax on the product.

The federal government and some state governments levy taxes on specific goods such as gasoline,cigarettes and beer.These are known as

If the Gini coefficient for Cartland is 1,it means that income distribution is perfectly equal in this society.

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

"Sin taxes," such as taxes on alcoholic beverages,are intended to

Figure 18-5 Figure 18-5 shows the Lorenz curve for a hypothetical country. -Refer to Figure 18-5.The highest 20 percent of households

According to the ability-to-pay principle of taxation

Which of the following is not one of the concerns of some policymakers and economists that the increase in the share of income earned by the 1 percent is damaging to the country?

The public choice model

The largest percentage of federal income tax revenue in the United States is paid by the

Both presidents Kennedy and Reagan proposed significant cuts in income taxes.Opponents of these tax cut proposals argued 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

Filters