Question 1

Table 15.1
 $\begin{array}{|c|c|c|c|} 
\hline & \text { Ivy } & \text { Jasmine } & \text { Rose } \
\hline \text { Subsidies for education } & \text { 2nd } & \text { 3rd } & \text { 1st } \
\hline \text { Research on Alzheimer's } & \text { 3rd } & \text { 1st } & \text { 2nd } \
\hline \text { Subsidies for daycare } & 1 \text { st } & \text { 2nd } & \text { 3rd }\
\hline
\end{array}$ 
Suppose $1 billion is available in the budget and Parliament is considering allocating the funds to one of the following three alternatives: 1)Subsidies for education, 2)Research on Alzheimer's or 3)Subsidies for daycare. Table 15.1 shows three voters' rankings of the alternatives.
-Refer to Table 15.1.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 education subsidies and increased subsidies for daycare,

Accepted Answer

A) Ivy and Jasmine vote for education subsidies, Rose votes for increased subsidies for daycare, and education subsidies wins. 
B) Ivy and Rose vote for increased subsidies for daycare, Jasmine votes for education subsidies, and increased subsidies for daycare wins. 
C) Jasmine and Rose vote for education subsidies, Rose votes for increased subsidies for daycare, and education subsidies wins. 
D) Jasmine and Ivy vote for increased subsidies for daycare, Rose votes for education subsidies, and increased subsidies for daycare wins.

Question 2

Figure 15.5
  
Figure 15.5 shows the Lorenz curves for Islandia and Syldavia.
-Refer to Figure 15.5.If area X = 2,060, area Y = 240, and area Z= 2,700, calculate the Gini coefficient for Syldavia.

Accepted Answer

A) 0.05 
B) 0.12 
C) 0.46 
D) 0.85

Question 3

The public choice model asserts that the self-interest of policymakers is likely to cause them to take actions that are inconsistent with the preferences of voters, even where those preferences are clear.

Accepted Answer

A) True 
 B)False

Question 4

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.

Question 5

As the value of the Gini coefficient approaches zero,

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.

Question 6

A situation where a Member of Parliament votes to approve a bill in exchange for favorable votes from other members on other bills is called

Accepted Answer

A) rent seeking. 
B) logrolling. 
C) regulatory capture. 
D) special interest legislation.

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Define logrolling.Explain why logrolling often results in legislation that benefits the economic interests of a few, while harming the interests of a larger group of people.

Accepted Answer

The answer of Define logrolling.Explain why logrolling often results in...

Question 9

An average tax rate is calculated as

Accepted Answer

A) total taxable income × taxes paid. 
B) total taxable income ÷ taxes paid. 
C) taxes paid ÷ total taxable income. 
D) (total taxable income - taxes paid)÷ taxable income.

Question 10

Suppose $1 billion is available in the budget and Parliament is considering allocating the funds to one of the following three alternatives:
a)subsidies for education
b)research on Alzheimer's
c)increased subsidies for daycare
If voters prefer a to b and b to c, then if preferences are transitive,

Accepted Answer

A) they should prefer a to c. 
B) they should prefer c to a. 
C) they should be indifferent between a and c. 
D) it is not always possible to rank voters' preferences between a and c.

Question 11

Table 15.1
 $\begin{array}{|c|c|c|c|} 
\hline & \text { Ivy } & \text { Jasmine } & \text { Rose } \
\hline \text { Subsidies for education } & \text { 2nd } & \text { 3rd } & \text { 1st } \
\hline \text { Research on Alzheimer's } & \text { 3rd } & \text { 1st } & \text { 2nd } \
\hline \text { Subsidies for daycare } & 1 \text { st } & \text { 2nd } & \text { 3rd }\
\hline
\end{array}$ 
Suppose $1 billion is available in the budget and Parliament is considering allocating the funds to one of the following three alternatives: 1)Subsidies for education, 2)Research on Alzheimer's or 3)Subsidies for daycare. Table 15.1 shows three voters' rankings of the alternatives.
-Refer to Table 15.1.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 subsidies for daycare.The third pair considered is between education subsidies and increased subsidies for daycare.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.

Question 12

The voting paradox suggests that the "voting market," as represented by elections,

Accepted Answer

A) lead to a superior outcome in representing consumer preferences compared to the private market for goods and services. 
B) may often lead to an inefficient outcome in representing consumer preferences compared to the private market for goods and services. 
C) is no different from the private market for goods and services in terms of representing consumer preferences. 
D) may not lead to an efficient outcome but certainly leads to a more equitable outcome in terms of distributing goods and services.

Question 13

When the elasticity of demand for a product is smaller than the elasticity of supply, sellers pay the majority of the tax on the product.

Accepted Answer

A) True 
 B)False

Question 14

Users fees for ports and marinas are an example of the ________.

Accepted Answer

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

Question 15

If you pay $3,000 in taxes on an income of $28,000, and $4,450 in taxes on an income of $38,000, what is your marginal tax rate? Show your work.

Accepted Answer

The answer of If you pay $3,000 in taxes on...

Question 16

Consider the following methods of taxing a corporation's income:
a)A flat tax, as opposed to a progressive tax, is levied on corporate profits.
b)A system whereby a corporation calculates its annual profit and notifies each shareholder of her portion of the profits.The shareholder would then be required to include this amount as taxable income for her personal income tax.The corporation does not pay a tax.
c)A system where the federal government continues to tax corporate income through the corporate income tax but allows individual taxpayers to receive, tax free, corporate dividends and capital gains.
Which of the methods above would avoid double taxation?

Accepted Answer

A) a and b only 
B) a and c only 
C) b and c only 
D) a, b, and c

Question 17

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

The answer of What is the difference between a marginal...

Question 18

The largest percentage of federal income tax revenue in Canada 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.

Question 19

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 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.

Exam 15: Public Choice, Taxes, and the Distribution of Income

Figure 15.5 Figure 15.5 shows the Lorenz curves for Islandia and Syldavia. -Refer to Figure 15.5.If area X = 2,060, area Y = 240, and area Z= 2,700, calculate the Gini coefficient for Syldavia.

The public choice model asserts that the self-interest of policymakers is likely to cause them to take actions that are inconsistent with the preferences of voters, even where those preferences are clear.

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

As the value of the Gini coefficient approaches zero,

A situation where a Member of Parliament votes to approve a bill in exchange for favorable votes from other members on other bills is called

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

Define logrolling.Explain why logrolling often results in legislation that benefits the economic interests of a few, while harming the interests of a larger group of people.

An average tax rate is calculated as

The voting paradox suggests that the "voting market," as represented by elections,

When the elasticity of demand for a product is smaller than the elasticity of supply, sellers pay the majority of the tax on the product.

Users fees for ports and marinas are an example of the ________.

If you pay $3,000 in taxes on an income of $28,000, and $4,450 in taxes on an income of $38,000, what is your marginal tax rate? Show your work.

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?

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

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

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