Question 1

In 2014,over 75 percent of the revenue of the U.S.federal government was raised through

Accepted Answer

A) individual income and social insurance taxes. 
B) property and social insurance taxes. 
C) sales and corporate income taxes. 
D) individual income and property taxes. 
A) individual income and social insurance taxes. 
B) property and social insurance taxes. 
C) sales and corporate income taxes. 
D) individual income and property taxes. A

Question 2

If you pay $2,000 in taxes on an income of $20,000,and a tax of $2,700 on an income of $30,000,then over this range of income the tax is

Accepted Answer

A) regressive. 
B) proportional. 
C) progressive. 
D) There is insufficient information to answer the question. 
A) regressive. 
B) proportional. 
C) progressive. 
D) There is insufficient information to answer the question. A

Question 3

Rent-seeking behavior,unlike profit-maximizing behavior in competitive markets,wastes society's scarce resources.

Accepted Answer

A) True 
 B)False  True

Question 4

Figure 18-7 shows the Lorenz curve for a hypothetical country.
-Refer to Figure 18-7.The second 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 5

A Lorenz curve summarizes the information provided by a Gini coefficient.

Accepted Answer

A) True 
 B)False

Question 6

If you pay $3,000 in taxes on an income of $28,000,and $4,450 in taxes on an income of $38,000,what is your marginal tax rate? Show your work.

Accepted Answer

Marginal tax rate =

Question 7

Figure 18-8  
-Refer to Figure 18-8 to answer the following questions.
a.Did the distribution of income become more equal in 2016 than it was in 2015,or did it become less equal? Explain.
b.If area A = 1,900,area B = 450,and area C = 2,650,calculate the Gini coefficient for 2015 and the Gini coefficient for 2016.

Accepted Answer

a.The distribution of income became less

Question 8

In 2014,which type of tax raised the most revenue for the U.S.federal government? Which type of tax raised the most revenue for state and local governments?

Accepted Answer

In 2014,individual income taxe

Question 9

What is the relationship between market failure and government failure?

Accepted Answer

Market failure is a case where the marke

Question 10

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.

Question 11

Economists caution that conventional statistics used to estimate the extent of poverty in the United States fail to account for benefits people receive that,if considered,would reduce the amount of poverty.Which of the following is an example of these benefits?

Accepted Answer

A) Individuals can use tax credits and the personal exemption to reduce their taxable incomes.This reduces what they owe the government and increases their disposable incomes. 
B) The federal income tax system is progressive.As a result,the poor have higher after-tax incomes than they would have if the income tax system was proportional or regressive. 
C) Individuals with low incomes receive non-cash benefits such as free school lunches and food stamps. 
D) The federal minimum wage forces employers to pay workers with low skills an efficiency wage. 
A) Individuals can use tax credits and the personal exemption to reduce their taxable incomes.This reduces what they owe the government and increases their disposable incomes. 
B) The federal income tax system is progressive.As a result,the poor have higher after-tax incomes than they would have if the income tax system was proportional or regressive. 
C) Individuals with low incomes receive non-cash benefits such as free school lunches and food stamps. 
D) The federal minimum wage forces employers to pay workers with low skills an efficiency wage.

Question 12

Which of the following is used to argue that the self-interest of public policymakers will often lead to actions that are inconsistent with the preferences of the voters they represent?

Accepted Answer

A) the voting paradox 
B) the median voter theorem 
C) rent seeking 
D) transitivity of voters' preferences 
A) the voting paradox 
B) the median voter theorem 
C) rent seeking 
D) transitivity of voters' preferences

Question 13

The actual division of the burden of a tax is called

Accepted Answer

A) tax credit. 
B) tax incidence. 
C) excess burden. 
D) tax dispersion. 
A) tax credit. 
B) tax incidence. 
C) excess burden. 
D) tax dispersion.

Question 14

Horizontal equity is achieved when taxes are collected from those who benefit from the government expenditure of the tax revenue.

Accepted Answer

A) True 
 B)False

Question 15

The poverty rate is defined as the percentage of the

Accepted Answer

A) labor force that is poor according to the federal government's definition of poverty. 
B) population that is exempt from paying federal income taxes. 
C) population who qualify to receive welfare payments and food stamps. 
D) population that is poor according to the federal government's definition of poverty. 
A) labor force that is poor according to the federal government's definition of poverty. 
B) population that is exempt from paying federal income taxes. 
C) population who qualify to receive welfare payments and food stamps. 
D) population that is poor according to the federal government's definition of poverty.

Question 16

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 17

Consider the following methods of taxing a corporation's income: 
A.A flat tax,as opposed to a progressive tax,is levied on corporate profits.
B.A system whereby a corporation calculates its annual profit and notifies each shareholder of her portion of the profits.The shareholder would then be required to include this amount as taxable income for her personal income tax.The corporation does not pay a tax.
C.A system where the federal government continues to tax corporate income through the corporate income tax but allows individual taxpayers to receive,tax free,corporate dividends and capital gains.
Which of the methods above would avoid double taxation?

Accepted Answer

A) a,b,and c 
B) a and b only 
C) a and c only 
D) b and c only 
A) a,b,and c 
B) a and b only 
C) a and c only 
D) b and c only

Question 18

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

Accepted Answer

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

Question 19

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 20

Figure 18-6 shows the Lorenz curves for Islandia and Syldavia.
-Refer to Figure 18-6.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.

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

In 2014,over 75 percent of the revenue of the U.S.federal government was raised through

If you pay $2,000 in taxes on an income of $20,000,and a tax of $2,700 on an income of $30,000,then over this range of income the tax is

Rent-seeking behavior,unlike profit-maximizing behavior in competitive markets,wastes society's scarce resources.

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

A Lorenz curve summarizes the information provided by a Gini coefficient.

If you pay $3,000 in taxes on an income of $28,000,and $4,450 in taxes on an income of $38,000,what is your marginal tax rate? Show your work.

In 2014,which type of tax raised the most revenue for the U.S.federal government? Which type of tax raised the most revenue for state and local governments?

What is the relationship between market failure and government failure?

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

Economists caution that conventional statistics used to estimate the extent of poverty in the United States fail to account for benefits people receive that,if considered,would reduce the amount of poverty.Which of the following is an example of these benefits?

Which of the following is used to argue that the self-interest of public policymakers will often lead to actions that are inconsistent with the preferences of the voters they represent?

The actual division of the burden of a tax is called

Horizontal equity is achieved when taxes are collected from those who benefit from the government expenditure of the tax revenue.

The poverty rate is defined as the percentage of the

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

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

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.

Figure 18-6 shows the Lorenz curves for Islandia and Syldavia. -Refer to Figure 18-6.Which country has the more unequal distribution of income?

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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