Question 1

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 2

The term "payroll taxes" is often used to refer to

Accepted Answer

A) individual income taxes that are withheld from paychecks. 
B) corporate income taxes. 
C) Social Security and Medicare taxes. 
D) sales taxes. 
A) individual income taxes that are withheld from paychecks. 
B) corporate income taxes. 
C) Social Security and Medicare taxes. 
D) sales taxes.

Question 3

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 4

Both presidents Kennedy and Reagan proposed significant cuts in income taxes because

Accepted Answer

A) at the time of their proposals the federal government was experiencing budget surpluses;that is,tax revenue exceeded government expenditures. 
B) they wanted to offset their proposals to increase other taxes. 
C) state governments had increased their taxes and they believed the tax cuts they proposed would result in most citizens paying about the same total state and federal taxes. 
D) they believed that the tax cuts would enhance economic efficiency. 
A) at the time of their proposals the federal government was experiencing budget surpluses;that is,tax revenue exceeded government expenditures. 
B) they wanted to offset their proposals to increase other taxes. 
C) state governments had increased their taxes and they believed the tax cuts they proposed would result in most citizens paying about the same total state and federal taxes. 
D) they believed that the tax cuts would enhance economic efficiency.

Question 5

$$\begin{array} { | c | c | } 
\hline \text { Income Tax Bracket } & \text { Tax Rate } \
\hline \text { on the first } \$ 6,000 \text { of taxable income } & 10 \% \
\hline \text { on the next } \$ 14,000 \text { of taxable income } & 15 \% \
\hline \text { on the next } \$ 24,500 \text { of taxable income } & 25 \% \
\hline \text { on the next } \$ 30,500 \text { of taxable income } & 30 \% \
\hline
\end{array}$$ Table 18-10 shows the income tax brackets and tax rates for single taxpayers in Bauxhall.
-Refer to Table 18-10.A tax exemption is granted for the first $10,000 earned per year.Suppose you earn $75,000.
a.What is the amount of taxes you will pay?
b.What is your average tax rate?
c.What is your marginal tax rate?

Accepted Answer

a.($6,000 × 0.10)+ ($14,000 ×

Question 6

As the value of the Gini coefficient approaches one

Accepted Answer

A) income distribution becomes less unequal. 
B) income distribution becomes more unequal. 
C) the percentage of the population under the poverty line increases. 
D) the percentage of the population under the poverty line decreases. 
A) income distribution becomes less unequal. 
B) income distribution becomes more unequal. 
C) the percentage of the population under the poverty line increases. 
D) the percentage of the population under the poverty line decreases.

Question 7

According to public choice theory,policymakers

Accepted Answer

A) place the interests of the public above their own self-interest. 
B) are likely to pursue their own self-interest,even if their self-interest conflicts with the public interest. 
C) act in ways to maximize economic efficiency. 
D) act in ways to bring about an equitable distribution of society's wealth. 
A) place the interests of the public above their own self-interest. 
B) are likely to pursue their own self-interest,even if their self-interest conflicts with the public interest. 
C) act in ways to maximize economic efficiency. 
D) act in ways to bring about an equitable distribution of society's wealth.

Question 8

There is a difference between who is legally required to send a tax payment to the government and who bears the burden of the tax.Which of the following would have the most impact on who bears the burden of an excise tax?

Accepted Answer

A) whether the tax is imposed by the federal government or a state government 
B) whether the tax is based on the ability-to-pay principle or the benefits-received principle 
C) The motive for the tax.If the tax is designed to raise revenue,more of the burden will fall on firms.If the tax is designed to achieve a social objective (for example,to discourage smoking)more of the burden will fall on consumers. 
D) The elasticity of demand for the item that is taxed. 
A) whether the tax is imposed by the federal government or a state government 
B) whether the tax is based on the ability-to-pay principle or the benefits-received principle 
C) The motive for the tax.If the tax is designed to raise revenue,more of the burden will fall on firms.If the tax is designed to achieve a social objective (for example,to discourage smoking)more of the burden will fall on consumers. 
D) The elasticity of demand for the item that is taxed.

Question 9

Figure 18-9  
-Refer to Figure 18-9 to answer the following questions.
a.Did the distribution of income become more equal in 2016 that it was in 2015,or did it become less equal? Explain.
b.If area A = 1,600,area B = 200,and area C = 3,200,calculate the Gini coefficient for 2015 and the Gini coefficient for 2016.

Accepted Answer

a.The distribution of income became more

Question 10

If you pay $14,000 in taxes on an income of $125,000,and $17,400 in taxes on an income of $144,000,what is your marginal tax rate? Show your work.

Accepted Answer

Marginal tax rate =

Question 11

A study by the Congressional Budget Office (CBO)regarding the corporate income tax included the following statement: "A corporation may write its check to the Internal Revenue Service for payment of the corporate income tax,but the money must come from somewhere..." The comments that followed this statement argued that

Accepted Answer

A) corporations pass on some of the burden of the tax to investors in the company,to workers,and to consumers. 
B) the corporate income tax is a reliable source of revenue because corporations cannot avoid paying the tax. 
C) it is necessary to retain the tax because it is based on the ability-to-pay principle. 
D) the tax is more progressive than the individual income tax. 
A) corporations pass on some of the burden of the tax to investors in the company,to workers,and to consumers. 
B) the corporate income tax is a reliable source of revenue because corporations cannot avoid paying the tax. 
C) it is necessary to retain the tax because it is based on the ability-to-pay principle. 
D) the tax is more progressive than the individual income tax.

Question 12

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 13

The horizontal-equity principle of taxation is not easy to use in practice because

Accepted Answer

A) some people engage in rent seeking to reduce their taxes below the level other people pay. 
B) people can use tax loopholes to reduce their incomes below the incomes of other taxpayers. 
C) different people receive different levels of government benefits even if their incomes are the same. 
D) it is difficult to determine whether people are in the same economic situation. 
A) some people engage in rent seeking to reduce their taxes below the level other people pay. 
B) people can use tax loopholes to reduce their incomes below the incomes of other taxpayers. 
C) different people receive different levels of government benefits even if their incomes are the same. 
D) it is difficult to determine whether people are in the same economic situation.

Question 14

All Gini coefficients must lie between 0 and 1.The lower the value

Accepted Answer

A) the more unequal the income distribution. 
B) the closer the income distribution is to being equal. 
C) the greater the degree of poverty. 
D) the lower the degree of poverty according to the federal government's definition of poverty. 
A) the more unequal the income distribution. 
B) the closer the income distribution is to being equal. 
C) the greater the degree of poverty. 
D) the lower the degree of poverty according to the federal government's definition of poverty.

Question 15

Economists James Buchanan and Gordon Tullock are well-known for developing

Accepted Answer

A) the impossibility theorem. 
B) the voting paradox. 
C) the public choice model. 
D) the concept of government failure. 
A) the impossibility theorem. 
B) the voting paradox. 
C) the public choice model. 
D) the concept of government failure.

Question 16

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 17

Suppose,on average,a family in Church Falls earning $60,000 per year paid 6 percent of its income in state taxes.A family earning $80,000 paid,on average,$4,760 in state income taxes.Are state taxes in Church Falls progressive or regressive? Be sure to explain the difference between a progressive tax and a regressive tax.

Accepted Answer

A regressive tax is a tax for which peop

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 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.

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

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

The term "payroll taxes" is often used to refer to

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

Both presidents Kennedy and Reagan proposed significant cuts in income taxes because

As the value of the Gini coefficient approaches one

According to public choice theory,policymakers

There is a difference between who is legally required to send a tax payment to the government and who bears the burden of the tax.Which of the following would have the most impact on who bears the burden of an excise tax?

If you pay $14,000 in taxes on an income of $125,000,and $17,400 in taxes on an income of $144,000,what is your marginal tax rate? Show your work.

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

The horizontal-equity principle of taxation is not easy to use in practice because

All Gini coefficients must lie between 0 and 1.The lower the value

Economists James Buchanan and Gordon Tullock are well-known for developing

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 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

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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