Question 1

As a group,people with high incomes are likely to have

Accepted Answer

A) greater-than-average family inheritances and greater than average SAT scores. 
B) greater-than-average holdings of stocks and bonds and lower-than-average productivity. 
C) greater-than-average productivity and greater-than-average amounts of capital. 
D) a stable marriage and no children. 
A) greater-than-average family inheritances and greater than average SAT scores. 
B) greater-than-average holdings of stocks and bonds and lower-than-average productivity. 
C) greater-than-average productivity and greater-than-average amounts of capital. 
D) a stable marriage and no children.

Question 2

Between 1970 and 2010,the poverty rate in East Asia declined dramatically from about 60 percent to less than 1 percent,while the poverty rate in Sub-Saharan Africa decreased from 40 percent to only 24 percent.The main reason for this is that

Accepted Answer

A) the population growth rate decreased in East Asia and increased in Sub-Saharan Africa. 
B) Governments in East Asia increased transfer payments to poor families over this period of time.The governments of Sub-Saharan Africa had practically no transfer payment programs from 1970 to 2010. 
C) The countries of East Asia have progressive income tax systems.The countries of Sub-Saharan Africa all have regressive income tax systems. 
D) East Asia experienced higher economic growth than Sub-Saharan Africa. 
A) the population growth rate decreased in East Asia and increased in Sub-Saharan Africa. 
B) Governments in East Asia increased transfer payments to poor families over this period of time.The governments of Sub-Saharan Africa had practically no transfer payment programs from 1970 to 2010. 
C) The countries of East Asia have progressive income tax systems.The countries of Sub-Saharan Africa all have regressive income tax systems. 
D) East Asia experienced higher economic growth than Sub-Saharan Africa.

Question 3

A tax is efficient if

Accepted Answer

A) individuals with the lowest incomes pay proportionately lower taxes than individuals with the highest incomes. 
B) it is based on profits earned and not on wages. 
C) it encourages saving and investment. 
D) it imposes a small excess burden relative to the revenue it raises. 
A) individuals with the lowest incomes pay proportionately lower taxes than individuals with the highest incomes. 
B) it is based on profits earned and not on wages. 
C) it encourages saving and investment. 
D) it imposes a small excess burden relative to the revenue it raises.

Question 4

Which of the following is a transfer payment?

Accepted Answer

A) the food stamp program 
B) a tax deduction 
C) Social Security payments 
D) an income tax credit 
A) the food stamp program 
B) a tax deduction 
C) Social Security payments 
D) an income tax credit

Question 5

Figure 18-1  
-Refer to Figure 18-1.The excess burden of the tax 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 6

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 7

The Arrow impossibility theorem states that

Accepted Answer

A) no system of voting can be devised that will always consistently represent the underlying preferences of voters. 
B) it is impossible for a majority voting system not to consistently represent the preferences of voters. 
C) it is impossible to separate corporate desires from public bureaucracy. 
D) no system of voting can be devised that will ensure a 100 percent voter turnout. 
A) no system of voting can be devised that will always consistently represent the underlying preferences of voters. 
B) it is impossible for a majority voting system not to consistently represent the preferences of voters. 
C) it is impossible to separate corporate desires from public bureaucracy. 
D) no system of voting can be devised that will ensure a 100 percent voter turnout.

Question 8

The actual division of a tax between buyers and sellers in a market is the excess burden of the tax.

Accepted Answer

A) True 
 B)False

Question 9

Horizontal equity means that two people in identical economic situations should pay the same amount of taxes.

Accepted Answer

A) True 
 B)False

Question 10

When considering changes in tax policy,economists usually focus on

Accepted Answer

A) the average tax rate. 
B) the marginal tax rate. 
C) people's willingness to pay taxes. 
D) people's ability to pay taxes. 
A) the average tax rate. 
B) the marginal tax rate. 
C) people's willingness to pay taxes. 
D) people's ability to pay taxes.

Question 11

A tax imposed by a state or local government on retail sales of most products is

Accepted Answer

A) an excise tax. 
B) a social service tax. 
C) a consumption tax. 
D) a sales tax. 
A) an excise tax. 
B) a social service tax. 
C) a consumption tax. 
D) a sales tax.

Question 12

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 13

Article Summary
Monthly marijuana sales in Colorado topped $100 million for the first time in August,2015,with $59.2 million in recreational sales and $41.4 million in medical sales.Colorado has levied three types of state taxes on recreational-use marijuana: a 2.9% standard sales tax,a 10% special marijuana sales tax,and a 15% excise tax on wholesale marijuana transfers.The 15% excise tax is earmarked for school construction projects.In August,recreational-use taxes and fees totaled $11.2 million and medical taxes and fees were $2 million,bringing total revenue-to-date for the year to over $86 million.
-Refer to the Article Summary.Colorado taxes marijuana with a 12.9% sales tax on buyers and a 15% wholesale excise tax on producers,which equates to 46 percent of the total taxes paid by retail buyers and 54 percent paid by producers.Does this necessarily mean that buyers will bear 46 percent of the burden of the tax and producers will bear 56 percent of the burden?

Accepted Answer

A) Yes,the percentage of taxes paid by each group represents the burden of the tax. 
B) No,because consumers and producers always bear equal burdens of a tax. 
C) No,the burden of a tax is always 100 percent on the consumer. 
D) No,the burden of the tax will depend on the elasticity of demand and supply. 
A) Yes,the percentage of taxes paid by each group represents the burden of the tax. 
B) No,because consumers and producers always bear equal burdens of a tax. 
C) No,the burden of a tax is always 100 percent on the consumer. 
D) No,the burden of the tax will depend on the elasticity of demand and supply.

Question 14

Gasoline taxes that are typically used for highway construction and maintenance are consistent with which of the following principles of taxation?

Accepted Answer

A) the ability-to-pay principle 
B) the horizontal-equity principle 
C) the vertical-equity principle 
D) the benefits-received principle 
A) the ability-to-pay principle 
B) the horizontal-equity principle 
C) the vertical-equity principle 
D) the benefits-received principle

Question 15

Unlike the market process,in the political market it is possible for some individuals to receive very large benefits from the political process without any significant impact on their tax bills.

Accepted Answer

A) True 
 B)False

Question 16

For the top 1 percent of income distribution,the share of total income earned by households in this group was about ________ percent in 2015.

Accepted Answer

A) 9 
B) 17 
C) 44 
D) 68 
A) 9 
B) 17 
C) 44 
D) 68

Question 17

One argument advanced in favor of not increasing the income tax on individuals with high income is that

Accepted Answer

A) increasing income tax increases wealth which contributes to increases in GDP. 
B) increasing the income tax on these individuals will reduce economic efficiency. 
C) increasing the income tax affects mostly middle-income and low-income individuals who are already paying heavy income taxes. 
D) not increasing income taxes will discourage corporations from increasing investment. 
A) increasing income tax increases wealth which contributes to increases in GDP. 
B) increasing the income tax on these individuals will reduce economic efficiency. 
C) increasing the income tax affects mostly middle-income and low-income individuals who are already paying heavy income taxes. 
D) not increasing income taxes will discourage corporations from increasing investment.

Question 18

Suppose the government wants to finance housing for low-income families by placing a tax on the purchase of luxury homes.Assume the government defines a luxury home as a home that is purchased for at least $1 million.This tax is consistent with the

Accepted Answer

A) benefits-received principle. 
B) social equity principle. 
C) ability-to-pay principle. 
D) horizontal-equity principle. 
A) benefits-received principle. 
B) social equity principle. 
C) ability-to-pay principle. 
D) horizontal-equity principle.

Question 19

Which of the following summarizes the information provided by a Lorenz curve?

Accepted Answer

A) the Lorenz coefficient 
B) the income distribution ratio 
C) the Gini coefficient 
D) the slope (the rise divided by the run)of the Lorenz curve at a particular point on the curve 
A) the Lorenz coefficient 
B) the income distribution ratio 
C) the Gini coefficient 
D) the slope (the rise divided by the run)of the Lorenz curve at a particular point on the curve

Question 20

A key assumption of the public choice model is that government policymakers will pursue their own self-interests.Economists assume that consumers and firms pursue their own self-interests when they interact in competitive markets and this interaction results in efficient economic outcomes.Does the pursuit of self-interest by policymakers result in efficient economic outcomes?

Accepted Answer

The public choice model can be used to e

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

As a group,people with high incomes are likely to have

Between 1970 and 2010,the poverty rate in East Asia declined dramatically from about 60 percent to less than 1 percent,while the poverty rate in Sub-Saharan Africa decreased from 40 percent to only 24 percent.The main reason for this is that

A tax is efficient if

Which of the following is a transfer payment?

Figure 18-1 -Refer to Figure 18-1.The excess burden of the tax is represented by the area

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?

The Arrow impossibility theorem states that

The actual division of a tax between buyers and sellers in a market is the excess burden of the tax.

Horizontal equity means that two people in identical economic situations should pay the same amount of taxes.

When considering changes in tax policy,economists usually focus on

A tax imposed by a state or local government on retail sales of most products is

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?

Gasoline taxes that are typically used for highway construction and maintenance are consistent with which of the following principles of taxation?

Unlike the market process,in the political market it is possible for some individuals to receive very large benefits from the political process without any significant impact on their tax bills.

For the top 1 percent of income distribution,the share of total income earned by households in this group was about ________ percent in 2015.

One argument advanced in favor of not increasing the income tax on individuals with high income is that

Suppose the government wants to finance housing for low-income families by placing a tax on the purchase of luxury homes.Assume the government defines a luxury home as a home that is purchased for at least $1 million.This tax is consistent with the

Which of the following summarizes the information provided by a Lorenz curve?

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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