Question 1

Which of the following statements concerning the federal corporate income tax is true?

Accepted Answer

A) It is an efficient tax because it imposes a small excess burden relative to the tax revenue it raises. 
B) The incidence of the corporate income tax can be determined by using demand and supply analysis. 
C) Determining the incidence of the corporate income tax is complicated because it is not certain how corporations respond to the tax. 
D) The corporate income tax is an example of the benefits-received principle. 
A) It is an efficient tax because it imposes a small excess burden relative to the tax revenue it raises. 
B) The incidence of the corporate income tax can be determined by using demand and supply analysis. 
C) Determining the incidence of the corporate income tax is complicated because it is not certain how corporations respond to the tax. 
D) The corporate income tax is an example of the benefits-received principle.

Question 2

For the top 1 percent of income distribution,the share of federal individual income taxes paid by households in this group in 2015 was ________ percent.

Accepted Answer

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

Question 3

Since lower-income people spend a larger proportion of their incomes on groceries than do higher-income people,if grocery stores were required by law to charge a 10-cent fee for disposable bags,this fee could be considered a

Accepted Answer

A) proportional tax. 
B) progressive tax. 
C) regressive tax. 
D) income tax. 
A) proportional tax. 
B) progressive tax. 
C) regressive tax. 
D) income tax.

Question 4

Figure 18-1  
-Refer to Figure 18-1.Area B + C 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 5

When members of Congress vote to pass new legislation,they will

Accepted Answer

A) always vote for the alternative favored by a majority of the voters. 
B) fail to consistently represent the underlying preferences of voters. 
C) always vote for the alternative favored by a plurality of the voters if there is no majority position. 
D) always fail to represent the underlying preferences of voters. 
A) always vote for the alternative favored by a majority of the voters. 
B) fail to consistently represent the underlying preferences of voters. 
C) always vote for the alternative favored by a plurality of the voters if there is no majority position. 
D) always fail to represent the underlying preferences of voters.

Question 6

What is the difference between a marginal tax rate and an average tax rate? Which is more important in determining the impact of the tax system on economic behavior?

Accepted Answer

A marginal tax rate is the fraction of e

Question 7

Economists argue that the corporate income tax is an example of a tax with a high deadweight loss because

Accepted Answer

A) some of the burden of the tax is passed on to consumers in the form of higher prices. 
B) it discourages corporations from undertaking capital investments to enhance market competitiveness. 
C) taxing a corporation's income amounts to double taxing the earnings on individual shareholders' investments in corporations. 
D) it encourages corporations to seek ways to evade taxes. 
A) some of the burden of the tax is passed on to consumers in the form of higher prices. 
B) it discourages corporations from undertaking capital investments to enhance market competitiveness. 
C) taxing a corporation's income amounts to double taxing the earnings on individual shareholders' investments in corporations. 
D) it encourages corporations to seek ways to evade taxes.

Question 8

The public choice model

Accepted Answer

A) examines the degree of market power that the public exerts in a market economy. 
B) examines the public's role in appointing politicians and ensuring that elected officials act in ways to reflect the public's preferences. 
C) applies economic analysis to government decision making. 
D) applies economic analysis to the collective decision making of consumers. 
A) examines the degree of market power that the public exerts in a market economy. 
B) examines the public's role in appointing politicians and ensuring that elected officials act in ways to reflect the public's preferences. 
C) applies economic analysis to government decision making. 
D) applies economic analysis to the collective decision making of consumers.

Question 9

What is rent seeking and how is it related to regulatory capture?

Accepted Answer

Rent seeking is the attempt by individua

Question 10

If the marginal tax rate is greater than the average tax rate,the tax structure is described as regressive.

Accepted Answer

A) True 
 B)False

Question 11

Congressman Flack votes for a program that will benefit the constituents of Congressman Walpole.The public choice model suggests that Flack's vote is best explained by which of the following?

Accepted Answer

A) rational ignorance 
B) party loyalty 
C) logrolling 
D) the voting paradox 
A) rational ignorance 
B) party loyalty 
C) logrolling 
D) the voting paradox

Question 12

The marginal tax rate is

Accepted Answer

A) the amount of taxes paid as a percentage of income. 
B) the amount of per-capita taxes paid. 
C) the amount of taxes paid as a percentage of gross domestic product (GDP). 
D) the fraction of each additional dollar of income that must be paid in taxes. 
A) the amount of taxes paid as a percentage of income. 
B) the amount of per-capita taxes paid. 
C) the amount of taxes paid as a percentage of gross domestic product (GDP). 
D) the fraction of each additional dollar of income that must be paid in taxes.

Question 13

If you pay a constant percentage of your taxable income in taxes,the tax is

Accepted Answer

A) regressive. 
B) proportional. 
C) progressive. 
D) random. 
A) regressive. 
B) proportional. 
C) progressive. 
D) random.

Question 14

Some economists who use the public choice model to explain the ways government intervenes in the economy believe that regulatory capture results when an agency or commission is given authority over a particular industry or product.Which of the following is the best example of regulatory capture?

Accepted Answer

A) The Food and Drug Administration (FD
A) has increased the time and expense pharmaceutical firms incur to receive approval to market a new drug. 
B) A federal government agency hires more employees than it requires to regulate an industry because it does not seek to minimize costs or maximize the agency's profits. 
C) The head of an agency is required to testify before Congress because Congress controls the size of the agency's budget.Congress "captures" the agency because of its budget authority. 
D) Firms that were regulated by the Interstate Commerce Commission (IC
C) attempted for many years to influence the ICC's actions. 
A) The Food and Drug Administration (FD
A) has increased the time and expense pharmaceutical firms incur to receive approval to market a new drug. 
B) A federal government agency hires more employees than it requires to regulate an industry because it does not seek to minimize costs or maximize the agency's profits. 
C) The head of an agency is required to testify before Congress because Congress controls the size of the agency's budget.Congress "captures" the agency because of its budget authority. 
D) Firms that were regulated by the Interstate Commerce Commission (IC
C) attempted for many years to influence the ICC's actions.

Question 15

In the United States,taxpayers are allowed to exclude from taxation a certain amount of income,called

Accepted Answer

A) the personal income exclusion. 
B) the income allowance. 
C) the income tax credit. 
D) the personal exemption. 
A) the personal income exclusion. 
B) the income allowance. 
C) the income tax credit. 
D) the personal exemption.

Question 16

According to the horizontal-equity principle of taxation

Accepted Answer

A) individuals who receive the benefits of a good or service should bear a greater share of the tax burden. 
B) individuals who are most able to pay should bear a greater share of the tax burden. 
C) people in the same economic situation should be treated equally. 
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 benefits of a good or service should bear a greater share of the tax burden. 
B) individuals who are most able to pay should bear a greater share of the tax burden. 
C) people in the same economic situation should be treated equally. 
D) individuals who are willing to bear a greater share of the tax burden should be compensated with non-monetary benefits.

Question 17

The Arrow impossibility theorem

Accepted Answer

A) explains why people can be rational as well as ignorant at the same time. 
B) explains why voting systems do not consistently represent the preferences of voters. 
C) explains why candidates for public office must represent the preferences of the political middle. 
D) explains why it is impossible,in most cases,to eliminate special-interest legislation after it has become law. 
A) explains why people can be rational as well as ignorant at the same time. 
B) explains why voting systems do not consistently represent the preferences of voters. 
C) explains why candidates for public office must represent the preferences of the political middle. 
D) explains why it is impossible,in most cases,to eliminate special-interest legislation after it has become law.

Question 18

Exempting food purchases from sales tax is consistent with the ability-to-pay principle,although not necessarily consistent with vertical equity.

Accepted Answer

A) True 
 B)False

Question 19

What is regulatory capture?

Accepted Answer

A) It is a situation in which a policymaker seeks to improve his election prospects by aligning himself with a powerful special interest group which will finance his political campaign. 
B) It is the exchange of political support between a regulatory agency and the regulated firm resulting in both parties capturing economic rents. 
C) It is a situation in which a firm being regulated successfully influences the regulatory agency's actions to benefit the interests of the firm,rather than the public interest. 
D) It is a situation in which a regulatory agency uses its authority to force actions that are not favored by the regulated firms but are in the public's interest. 
A) It is a situation in which a policymaker seeks to improve his election prospects by aligning himself with a powerful special interest group which will finance his political campaign. 
B) It is the exchange of political support between a regulatory agency and the regulated firm resulting in both parties capturing economic rents. 
C) It is a situation in which a firm being regulated successfully influences the regulatory agency's actions to benefit the interests of the firm,rather than the public interest. 
D) It is a situation in which a regulatory agency uses its authority to force actions that are not favored by the regulated firms but are in the public's interest.

Question 20

Which of the following groups had the highest poverty rate in 2014 in the United States?

Accepted Answer

A) Asians 
B) blacks 
C) Hispanics 
D) female heads of families 
A) Asians 
B) blacks 
C) Hispanics 
D) female heads of families

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

Which of the following statements concerning the federal corporate income tax is true?

For the top 1 percent of income distribution,the share of federal individual income taxes paid by households in this group in 2015 was ________ percent.

Since lower-income people spend a larger proportion of their incomes on groceries than do higher-income people,if grocery stores were required by law to charge a 10-cent fee for disposable bags,this fee could be considered a

Figure 18-1 -Refer to Figure 18-1.Area B + C represents

When members of Congress vote to pass new legislation,they will

What is the difference between a marginal tax rate and an average tax rate? Which is more important in determining the impact of the tax system on economic behavior?

Economists argue that the corporate income tax is an example of a tax with a high deadweight loss because

The public choice model

What is rent seeking and how is it related to regulatory capture?

If the marginal tax rate is greater than the average tax rate,the tax structure is described as regressive.

Congressman Flack votes for a program that will benefit the constituents of Congressman Walpole.The public choice model suggests that Flack's vote is best explained by which of the following?

The marginal tax rate is

If you pay a constant percentage of your taxable income in taxes,the tax is

Some economists who use the public choice model to explain the ways government intervenes in the economy believe that regulatory capture results when an agency or commission is given authority over a particular industry or product.Which of the following is the best example of regulatory capture?

In the United States,taxpayers are allowed to exclude from taxation a certain amount of income,called

According to the horizontal-equity principle of taxation

The Arrow impossibility theorem

Exempting food purchases from sales tax is consistent with the ability-to-pay principle,although not necessarily consistent with vertical equity.

What is regulatory capture?

Which of the following groups had the highest poverty rate in 2014 in the United States?

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