Question 1

If your income is $92,000 and you pay taxes of $19,475,what is your average tax rate? Show your work.

Accepted Answer

Average tax rate = $

Question 2

$$\begin{array} { | c | c | } 
\hline \text { Incame Tax Bracket } & \begin{array} { c } 
\text { Mar ginal Tax } \
\text { Rate }
\end{array} \
\hline \$ 0 - 8,000 & 12 \% \
\hline 8,001 - 22,000 & 17 \% \
\hline 22,001 - 48,000 & 25 \% \
\hline 48,001 \text { and over } & 38 \% \
\hline
\end{array}$$ Table 18-6 shows the income tax brackets and tax rates for single taxpayers in Calpernia.
-Refer to Table 18-6.Calculate the income tax paid by Sasha,a single taxpayer with an income of $60,000.

Accepted Answer

A) $22,800 
B) $14,400 
C) $13,800 
D) $13,642 
A) $22,800 
B) $14,400 
C) $13,800 
D) $13,642

Question 3

Suppose the government imposes an 8 percent sales tax on clothing items and the tax is levied on sellers.Who pays for the tax in this situation? (Assume that the demand curve is downward sloping and that the supply curve is upward sloping. )

Accepted Answer

A) The tax is borne entirely by the sellers. 
B) The sellers will pass on the entire sales tax to consumers and therefore the consumers bear the tax. 
C) The tax will be borne partly by consumers and partly by sellers. 
D) It is not possible to answer the question without information on price elasticities. 
A) The tax is borne entirely by the sellers. 
B) The sellers will pass on the entire sales tax to consumers and therefore the consumers bear the tax. 
C) The tax will be borne partly by consumers and partly by sellers. 
D) It is not possible to answer the question without information on price elasticities.

Question 4

A regressive tax is a tax for which people with lower incomes

Accepted Answer

A) pay a lower percentage of their incomes in tax than do people with higher incomes. 
B) pay a higher percentage of their incomes in tax than do people with higher incomes. 
C) pay the same percentage of their incomes in tax as do people with higher incomes. 
D) do not have to pay unless their incomes exceeds a certain amount. 
A) pay a lower percentage of their incomes in tax than do people with higher incomes. 
B) pay a higher percentage of their incomes in tax than do people with higher incomes. 
C) pay the same percentage of their incomes in tax as do people with higher incomes. 
D) do not have to pay unless their incomes exceeds a certain amount.

Question 5

The public choice model assumes that government policymakers

Accepted Answer

A) must promote the public interest at the expense of their own self-interests in order to be re-elected. 
B) will pursue their self-interests in personal affairs but only if it does not conflict with the public interest. 
C) will often act irrationally in their personal affairs,but will act rationally when they promote the public interest. 
D) are likely to pursue their own self-interests,even if their self-interests conflict with the public interest. 
A) must promote the public interest at the expense of their own self-interests in order to be re-elected. 
B) will pursue their self-interests in personal affairs but only if it does not conflict with the public interest. 
C) will often act irrationally in their personal affairs,but will act rationally when they promote the public interest. 
D) are likely to pursue their own self-interests,even if their self-interests conflict with the public interest.

Question 6

"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 7

Vertical-equity is most closely associated with which of the following goals or principles?

Accepted Answer

A) the horizontal-equity principle 
B) the goal of economic efficiency 
C) the goal of attaining social objectives 
D) the ability-to-pay principle 
A) the horizontal-equity principle 
B) the goal of economic efficiency 
C) the goal of attaining social objectives 
D) the ability-to-pay principle

Question 8

Figure 18-1  
-Refer to Figure 18-1.Area E + H represents

Accepted Answer

A) the portion of sales tax revenue borne by consumers. 
B) the portion of sales tax revenue borne by producers. 
C) the excess burden of the sales tax. 
D) sales tax revenue collected by the government. 
A) the portion of sales tax revenue borne by consumers. 
B) the portion of sales tax revenue borne by producers. 
C) the excess burden of the sales tax. 
D) sales tax revenue collected by the government.

Question 9

All of the following occur whenever a government taxes a product except

Accepted Answer

A) the quantity consumed of that product falls. 
B) the price of that product rises. 
C) the marginal benefit of the last unit sold exceeds the marginal cost of producing it. 
D) there will be no excess burden if the government's tax revenue is sufficiently large to offset the deadweight loss. 
A) the quantity consumed of that product falls. 
B) the price of that product rises. 
C) the marginal benefit of the last unit sold exceeds the marginal cost of producing it. 
D) there will be no excess burden if the government's tax revenue is sufficiently large to offset the deadweight loss.

Question 10

If voters lack an economic incentive to become informed about pending legislation,then their preferences become a constraint on legislators voting for rent-seeking legislation.

Accepted Answer

A) True 
 B)False

Question 11

What is the poverty rate?

Accepted Answer

A) the rate at which the number of people relative to the size of the population fall below the poverty line 
B) the percentage of the population earning an annual income below the poverty line,according to the federal government's definition 
C) the percentage of working adults whose annual income is sufficiently low as to be are exempt from paying income taxes 
D) the percentage of households who qualify for government assistance to meet the minimal requirement for adequate nutrition 
A) the rate at which the number of people relative to the size of the population fall below the poverty line 
B) the percentage of the population earning an annual income below the poverty line,according to the federal government's definition 
C) the percentage of working adults whose annual income is sufficiently low as to be are exempt from paying income taxes 
D) the percentage of households who qualify for government assistance to meet the minimal requirement for adequate nutrition

Question 12

The idea that individuals should be taxed in proportion to the marginal benefits that they receive from public goods is called

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 13

Income inequality in the United States has increased somewhat over the past 25 years.Two factors that appear to have contributed to this are

Accepted Answer

A) tax cuts on high-income individuals and large increases in prices of stocks. 
B) strong economic growth and low inflation. 
C) rapid technological change and expanding international trade. 
D) outsourcing of jobs by U.S.firms and cuts in taxes on capital gains. 
A) tax cuts on high-income individuals and large increases in prices of stocks. 
B) strong economic growth and low inflation. 
C) rapid technological change and expanding international trade. 
D) outsourcing of jobs by U.S.firms and cuts in taxes on capital gains.

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 producer'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 15

$$\begin{array} { | c | c | c | c | } 
\hline & \text { Ivy } & \text { Jasmnine } & \text { Rose } \
\hline \text { Subsidies for educationt } & \text { 2nd } & \text { 3rd } & \text { 1st } \
\hline \text { Research on Alzheimer's } & \text { 3rd } & \text { 1st } & \text { 2nd } \
\hline \text { Increased border security } & \text { 1st } & \text { 2nd } & \text { 3rd } \
\hline
\end{array}$$ Suppose $1 billion is available in the budget and Congress is considering allocating the funds to one of the following three alternatives: 1)Subsidies for education,2)Research on Alzheimer's or 3)Increased border security.Table 18-1 shows three voters' rankings of the alternatives.
-Refer to Table 18-1.Suppose a series of votes are taken in which each pair of alternatives is considered in turn.The first pair considered is between subsidies for education and research on Alzheimer's.The second pair considered is between Alzheimer's research and increased border security.The third pair considered is between education subsidies and increased border security.In this case,the collective preferences of the voters

Accepted Answer

A) turn out to be transitive and will yield a consistent outcome. 
B) turn out to be transitive but will not result in a consistent outcome. 
C) turn out not to be transitive and will not result in a consistent outcome. 
D) turn out not to be transitive but will yield a consistent outcome. 
A) turn out to be transitive and will yield a consistent outcome. 
B) turn out to be transitive but will not result in a consistent outcome. 
C) turn out not to be transitive and will not result in a consistent outcome. 
D) turn out not to be transitive but will yield a consistent outcome.

Question 16

Which of the following tax systems would help reduce income inequality the most?

Accepted Answer

A) a regressive tax system 
B) a proportional tax system 
C) a progressive tax system 
D) a consumption tax system 
A) a regressive tax system 
B) a proportional tax system 
C) a progressive tax system 
D) a consumption tax system

Question 17

In the United States,over the past 40 years federal revenues as a share of gross domestic product have

Accepted Answer

A) risen steadily and now are about 40 percent. 
B) ranged between 17 and 19 percent. 
C) fallen below 10 because of rapid economic growth. 
D) been limited by law to no more than 20 percent. 
A) risen steadily and now are about 40 percent. 
B) ranged between 17 and 19 percent. 
C) fallen below 10 because of rapid economic growth. 
D) been limited by law to no more than 20 percent.

Question 18

Is a typical person likely to gather more information when buying a new computer or when voting for a member of the U.S.Senate? Why?

Accepted Answer

The typical person is likely to gather m

Question 19

Studies by the U.S.Census Bureau have shown that

Accepted Answer

A) families remain below the poverty line for an average of five years. 
B) there is significant income mobility in the U.S.over time. 
C) income mobility in the U.S.is minimal. 
D) over half the people below the poverty line never move out of poverty. 
A) families remain below the poverty line for an average of five years. 
B) there is significant income mobility in the U.S.over time. 
C) income mobility in the U.S.is minimal. 
D) over half the people below the poverty line never move out of poverty.

Question 20

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.

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

If your income is $92,000 and you pay taxes of $19,475,what is your average tax rate? Show your work.

Suppose the government imposes an 8 percent sales tax on clothing items and the tax is levied on sellers.Who pays for the tax in this situation? (Assume that the demand curve is downward sloping and that the supply curve is upward sloping. )

A regressive tax is a tax for which people with lower incomes

The public choice model assumes that government policymakers

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

Vertical-equity is most closely associated with which of the following goals or principles?

Figure 18-1 -Refer to Figure 18-1.Area E + H represents

All of the following occur whenever a government taxes a product except

If voters lack an economic incentive to become informed about pending legislation,then their preferences become a constraint on legislators voting for rent-seeking legislation.

What is the poverty rate?

The idea that individuals should be taxed in proportion to the marginal benefits that they receive from public goods is called

Income inequality in the United States has increased somewhat over the past 25 years.Two factors that appear to have contributed to this are

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

Which of the following tax systems would help reduce income inequality the most?

In the United States,over the past 40 years federal revenues as a share of gross domestic product have

Is a typical person likely to gather more information when buying a new computer or when voting for a member of the U.S.Senate? Why?

Studies by the U.S.Census Bureau have shown that

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

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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