Question 1

The median voter theorem will be an accurate predictor of the outcomes of elections

Accepted Answer

A)  only when voter turnout is very high. 
B)  when a majority of voters have preferences very similar to those of the median voter. 
C)  when a majority of voters have preferences different from those of the median voter. 
D)  regardless of whether preferences among voters are similar or different from those of the median voter.

Question 2

An example of a payroll tax in the United States is

Accepted Answer

A)  the Social Security tax. 
B)  the tax on corporate profit. 
C)  an excise tax on gasoline. 
D)  the property tax on real estate.

Question 3

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.

Question 4

What is meant by the term "rational ignorance"?

Accepted Answer

A)  It refers to the absence of a negative incentive, for example, a fine for not voting, which results in a low voter turnout. 
B)  It refers to a situation where one policymaker deliberately approves a bill he does not support in exchange for a future favorable vote for his own cause. 
C)  It means the lack an economic incentive for voters to become informed about a pending legislation. 
D)  It refers to the fact that policymakers and their constituents have different ideas of what it means to behave rationally and each party deliberately ignores the other's view.

Question 5

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.

Accepted Answer

The answer of Last year, Anthony Millanti earned exactly $30,000...

Question 6

Absolute poverty measures vary from country to country. For example, in 2017, the poverty line in the United States for a family of four was an annual income of $24,600 but economists often use a much lower threshold income of $1.25 per day when calculating the rate of poverty in poor countries. Using this $1.25-per-day measure of the poverty line, which of the following regions had the smallest percentage decrease in the percentage of the population in poverty from 1970 to 2010?

Accepted Answer

A)  Latin America 
B)  sub-Saharan Africa 
C)  East Asia 
D)  the Middle East and North Africa

Question 7

The actual division of the burden of a tax is called

Accepted Answer

A)  tax credit. 
B)  tax incidence. 
C)  excess burden. 
D)  tax dispersion.

Question 8

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

Question 9

The federal government and some state governments levy taxes on specific goods such as gasoline, cigarettes, and beer. These are known as

Accepted Answer

A)  sales taxes. 
B)  sin taxes. 
C)  specific taxes. 
D)  excise taxes.

Question 10

In reference to the federal income tax system, a tax bracket is

Accepted Answer

A)  the estimated amount of federal income tax firms withhold from their employees' paychecks. 
B)  the formula the federal government uses to determine the dollar amount of the personal exemption and the amounts taxpayers are allowed for deductions from their incomes. 
C)  used to determine the average tax rate. 
D)  the income range within which a tax rate applies.

Question 11

The proposition that the outcome of a majority vote is likely to represent the preferences of the voter who is in the political middle is called

Accepted Answer

A)  the mean (or average) voter theorem. 
B)  the voting paradox. 
C)  the Arrow impossibility theorem. 
D)  the median voter theorem.

Question 12

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.

Question 13

According to the benefits-received principle, those who receive the benefits from a government program should pay the taxes that support the program.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements about rent seeking is false?

Accepted Answer

A)  Rent seeking often involves governments because governments transfer huge amounts of funds that economic agents must compete for. 
B)  A person is engaging in rent-seeking behavior when he uses the political process to acquire ownership of a resource that belongs to the public. 
C)  Because rent seeking redistributes society's resources, anyone engaging in such behavior is violating the law. 
D)  If a firm can benefit from government intervention in the economy, it is more likely to spend resources attempting to secure this intervention than toward innovating its product to gain a competitive edge in the market.

Question 15

Policymakers focus on marginal tax rate changes when making changes in the tax code because the marginal tax rate

Accepted Answer

A)  determines how tax revenue will change as national income increases. 
B)  affects people's willingness to work, save, and invest. 
C)  always equals the average tax rate which is harder to measure. 
D)  determines how much revenue the government will have to spend.

Question 16

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

Question 17

At the state and local levels in the United States, the largest source of tax revenue is

Accepted Answer

A)  the individual income tax. 
B)  the property tax on real estate. 
C)  the sales tax. 
D)  grants from the federal government.

Question 18

When the demand for a product is less elastic than the supply

Accepted Answer

A)  consumers pay the majority of the tax on the product. 
B)  firms pay the majority of the tax on the product. 
C)  firms pay the entire tax on the product. 
D)  consumers pay the entire tax on the product.

Question 19

Table 18-1
  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. If the vote is between allocating funds to research on Alzheimer's and increased border security

Accepted Answer

A)  Ivy and Jasmine vote for Alzheimer's research, Rose votes for increased border security, and Alzheimer's research wins. 
B)  Ivy and Rose vote for increased border security, Jasmine votes for Alzheimer's research, and increased border security wins. 
C)  Jasmine and Rose vote for Alzheimer's research, Ivy votes for increased border security, and Alzheimer's research wins. 
D)  Jasmine and Ivy vote for increased border security, Rose votes for Alzheimer's research, and increased border security wins.

Question 20

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.

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