Question 1

A tax bracket is

Accepted Answer

A) the percent of taxable income paid in taxes at a specific income bracket. 
B) the income range within which a particular tax rate applies. 
C) the type of tax structure for which a range of taxes applies. 
D) the range,from the high to the low tax rate,of a particular type of tax. 
A) the percent of taxable income paid in taxes at a specific income bracket. 
B) the income range within which a particular tax rate applies. 
C) the type of tax structure for which a range of taxes applies. 
D) the range,from the high to the low tax rate,of a particular type of tax.

Question 2

The sales tax

Accepted Answer

A) is consistent with the benefits-received principle because low-income individuals spend less on goods and services than do high-income people. 
B) is not consistent with the ability-to-pay principle because low-income individuals tend to spend a larger fraction of their income than do high-income individuals. 
C) is not consistent with the ability-to-pay principle because low-income individuals tend to purchase a smaller bundle of goods and services compared to high-income individuals. 
D) is not consistent with the benefits-received principle because low-income individuals spend less on goods and services than do high-income individuals,yet pay the same sales tax rate. 
A) is consistent with the benefits-received principle because low-income individuals spend less on goods and services than do high-income people. 
B) is not consistent with the ability-to-pay principle because low-income individuals tend to spend a larger fraction of their income than do high-income individuals. 
C) is not consistent with the ability-to-pay principle because low-income individuals tend to purchase a smaller bundle of goods and services compared to high-income individuals. 
D) is not consistent with the benefits-received principle because low-income individuals spend less on goods and services than do high-income individuals,yet pay the same sales tax rate.

Question 3

Describe each of the principles governments consider when deciding which taxes to use.

Accepted Answer

In deciding which taxes to use,a governm

Question 4

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 5

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 6

Many state governments use lotteries to raise revenue.If a lottery is viewed as a tax,is it most likely a progressive tax or a regressive tax? What information would you need to determine whether the burden of a lottery is progressive or regressive?

Accepted Answer

The lottery "tax" is generally considere

Question 7

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 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 8

Last year,Anthony Millanti earned exactly $30,000 of taxable income.Assume that the income tax system used to determine Anthony's tax liability is progressive.The table below lists the tax brackets and the marginal tax rates that apply to each bracket.
a.Draw a new table that lists the amounts of income tax that Anthony is obligated to pay for each tax bracket,and the total tax he owes the government.(Assume that there are no allowable tax deductions,tax credits,personal exemptions,or any other deductions that Anthony can use to reduce his tax liability).
b.Determine Anthony's average tax rate.
 $$\begin{array} { | c | c | } 
\hline & \text { Marginal Tax } \
\text { Tax Bracket }&\text {Rate}\
\hline \$ 0 - 5,000 & 0.05 ( 5 \% ) \
\hline 5,001 - 10,000 & 0.10 ( 10 \% ) \
\hline 10,001 - 15,000 & 0.15 ( 15 \% / 6 ) \
\hline 15,001 - 20,000 & 0.20 ( 20 \% / 6 ) \
\hline 20,001 - 25,000 & 0.25 ( 25 \% / 6 ) \
\hline 25,001 - 30,000 & 0.30 ( 30 \% / 6 ) \
\hline
\end{array}$$

Accepted Answer

a.
 \[\begin{array} { | c | c | c | } 
\

Question 9

The median voter theorem states that the outcome of a majority vote

Accepted Answer

A) tends to favor the preferences of high-income individuals and ignore the median voter. 
B) is likely to represent the preferences of society's middle-income voter. 
C) is likely to represent the preferences of the voter who is in the political middle. 
D) is determined by the average consumer and producer in an economy. 
A) tends to favor the preferences of high-income individuals and ignore the median voter. 
B) is likely to represent the preferences of society's middle-income voter. 
C) is likely to represent the preferences of the voter who is in the political middle. 
D) is determined by the average consumer and producer in an economy.

Question 10

The median voter model implies that

Accepted Answer

A) many people will be satisfied with the amount of spending on government funded projects. 
B) many people will be dissatisfied with the amount of spending on government funded projects. 
C) people in the political middle will be dissatisfied with the amount of spending on government funded projects. 
D) spending on government funded projects reflects the preferences of only those far away from the median. 
A) many people will be satisfied with the amount of spending on government funded projects. 
B) many people will be dissatisfied with the amount of spending on government funded projects. 
C) people in the political middle will be dissatisfied with the amount of spending on government funded projects. 
D) spending on government funded projects reflects the preferences of only those far away from the median.

Question 11

Measures of poverty (for example,the poverty line)and the distribution of income (for example,the Lorenz curve and the Gini coefficient)are misleading for which of the following two reasons?

Accepted Answer

A) First,these measures do not take into account income mobility over time.Second,these measures ignore the effects of government programs meant to reduce poverty. 
B) First,none of these measures are adjusted for inflation.Second,they do not measure income on a per capita basis. 
C) First,these measures fail to include the income U.S.citizens earn working for foreign firms that have operations located in the United States.Second,these measures fail to include income foreign citizens earn working for U.S.firms that have operations in foreign countries. 
D) First,these measures fail to include dividend and interest income earned on stocks and bonds.Second,these measures fail to include the value of goods and services citizens make for their own consumption that are not sold in markets. 
A) First,these measures do not take into account income mobility over time.Second,these measures ignore the effects of government programs meant to reduce poverty. 
B) First,none of these measures are adjusted for inflation.Second,they do not measure income on a per capita basis. 
C) First,these measures fail to include the income U.S.citizens earn working for foreign firms that have operations located in the United States.Second,these measures fail to include income foreign citizens earn working for U.S.firms that have operations in foreign countries. 
D) First,these measures fail to include dividend and interest income earned on stocks and bonds.Second,these measures fail to include the value of goods and services citizens make for their own consumption that are not sold in markets.

Question 12

A personal exemption refers to

Accepted Answer

A) the tax rate that applies to a particular tax bracket. 
B) the tax bracket that represents basic living expenses. 
C) an amount representing basic living expenses that can be subtracted from income. 
D) a dispensation that allows certain qualifying individuals not to pay federal taxes. 
A) the tax rate that applies to a particular tax bracket. 
B) the tax bracket that represents basic living expenses. 
C) an amount representing basic living expenses that can be subtracted from income. 
D) a dispensation that allows certain qualifying individuals not to pay federal taxes.

Question 13

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 14

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 government's revenue from the tax is represented by the area

Accepted Answer

A) (PaPc × Qa)if the supply curve is S0 and (PbPc × Qb)if the supply curve is S1. 
B) (PaPd × Qa)if the supply curve is S0 and (PbPe × Qb)if the supply curve is S1. 
C) (PaPe × Qa)under either supply curve. 
D) (PbPe × Qb)under either supply curve. 
A) (PaPc × Qa)if the supply curve is S0 and (PbPc × Qb)if the supply curve is S1. 
B) (PaPd × Qa)if the supply curve is S0 and (PbPe × Qb)if the supply curve is S1. 
C) (PaPe × Qa)under either supply curve. 
D) (PbPe × Qb)under either supply curve.

Question 15

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 16

Figure 18-4  
-Refer to Figure 18-4.Rank the above panels in terms of most unequal income distribution to least unequal income distribution.

Accepted Answer

A) Panel A,Panel B,Panel C 
B) Panel B,Panel C,Panel A 
C) Panel A,Panel C,Panel B 
D) Panel C,Panel B,Panel A 
A) Panel A,Panel B,Panel C 
B) Panel B,Panel C,Panel A 
C) Panel A,Panel C,Panel B 
D) Panel C,Panel B,Panel A

Question 17

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 18

Figure 18-1  
-Refer to Figure 18-1.Of the tax revenue collected by the government,the portion borne by producers 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

Of the following sources of tax revenue for state and local governments,which was the smallest in 2014?

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 20

A Gini coefficient of ________ means that an income distribution is perfectly equal and a Gini coefficient of ________ means the income distribution is perfectly unequal.

Accepted Answer

A) 0;1 
B) 1;0 
C) 0,100 
D) 100,0 
A) 0;1 
B) 1;0 
C) 0,100 
D) 100,0

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

A tax bracket is

The sales tax

Describe each of the principles governments consider when deciding which taxes to use.

According to the ability-to-pay principle of taxation

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

Many state governments use lotteries to raise revenue.If a lottery is viewed as a tax,is it most likely a progressive tax or a regressive tax? What information would you need to determine whether the burden of a lottery is progressive or regressive?

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 median voter theorem states that the outcome of a majority vote

The median voter model implies that

Measures of poverty (for example,the poverty line)and the distribution of income (for example,the Lorenz curve and the Gini coefficient)are misleading for which of the following two reasons?

A personal exemption refers to

For a given supply curve,how does the elasticity of demand affect the burden of a tax imposed on a 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 government's revenue from the tax is represented by the area

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

Figure 18-4 -Refer to Figure 18-4.Rank the above panels in terms of most unequal income distribution to least unequal income distribution.

The Gini coefficient is measured by

Figure 18-1 -Refer to Figure 18-1.Of the tax revenue collected by the government,the portion borne by producers is represented by the area

Of the following sources of tax revenue for state and local governments,which was the smallest in 2014?

A Gini coefficient of ________ means that an income distribution is perfectly equal and a Gini coefficient of ________ means the income distribution is perfectly unequal.

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 Gini coefficient of means that an income distribution is perfectly equal and a Gini coefficient of means the income distribution is perfectly unequal.