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.

Question 2

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.

Question 3

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.

Question 4

What is logrolling?

Accepted Answer

A) a situation where a policymaker votes to approve a bill in exchange for favorable votes from his colleagues on other bills 
B) a situation where policymakers transfer resources from those voters who are unlikely to have a huge impact on the political outcome to those who contribute to political campaigns 
C) a situation where a policymaker accepts bribes to prevent proposed legislation from coming to a vote 
D) a situation where a policymaker gets the government to fund a non-essential project benefiting her family members

Question 5

The excess burden of a tax

Accepted Answer

A) measures the efficiency loss to the economy that results from a tax, causing a reduction in the quantity of goods and services produced. 
B) is measured by the administrative costs required to implement a tax system. 
C) is a measure of the hardship imposed on low-income individuals in a society. 
D) is a measure of the foregone consumption as a result of having to pay taxes.

Question 6

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 7

Figure 18-2
  
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 consumer's burden of the tax

Accepted Answer

A) is Pₐ - Pc under either supply curve. 
B) is Pb - Pc under either supply curve. 
C) is Pₐ - Pc if the supply curve is S₀ and Pb - Pc if the supply curve is S₁. 
D) is Pₐ - Pd if the supply curve is S₀ and Pb - Pₑ if the supply curve is S₁.

Question 8

Consider a public good such as fire protection services.Rich people may benefit more than the poor from such a service because rich people stand to lose more from a fire that destroys property.In this case

Accepted Answer

A) the ability-to-pay principle may support the rich paying more taxes than the poor, but not the benefits-received principle. 
B) the benefits-received principle may support the rich paying more taxes than the poor, but not the ability-to-pay principle. 
C) both the benefits-received and the ability-to-pay principles may support the rich paying more taxes than the poor. 
D) neither the benefits-received nor the ability-to-pay principles may support the rich paying more taxes than the poor.

Question 9

When the demand for a product is less elastic than the supply, consumers pay the majority of the tax on the product.

Accepted Answer

A) True 
 B)False

Question 10

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 11

All Gini coefficients must lie between 0 and 1.The lower the value,

Accepted Answer

A) the more unequal the income distribution. 
B) the closer the income distribution is to being equal. 
C) the greater the degree of poverty. 
D) the lower the degree of poverty according to the federal government's definition of poverty.

Question 12

U.S.taxpayers spend many hours during the year maintaining records for tax purposes and preparing their income tax returns.This administrative cost

Accepted Answer

A) is part of the deadweight loss of taxation. 
B) is equal to the value of consumer surplus associated with the income tax system. 
C) can be claimed as a deduction on income tax returns. 
D) is larger for individuals in the lowest income quintile than for individuals in the highest income quintile.

Question 13

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 14

The average tax rate is calculated as

Accepted Answer

A) total income divided by the total tax paid. 
B) the change in total tax paid divided by the change in income. 
C) total tax paid divided by total income. 
D) the change in income divided by the change in total tax paid.

Question 15

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 subsidies for education and research on Alzheimer's,

Accepted Answer

A) Ivy and Jasmine vote for education subsidies, Rose votes for Alzheimer's research, and education subsidies wins. 
B) Ivy and Rose vote for education subsidies, Jasmine votes for Alzheimer's research, and education subsidies wins. 
C) Jasmine and Rose vote for Alzheimer's research, Ivy votes for education subsidies, and Alzheimer's research wins. 
D) Jasmine and Ivy vote for Alzheimer's research, Rose votes for education subsidies, and Alzheimer's research wins.

Question 16

The idea that two taxpayers in the same economic circumstances should pay the same level of taxes is known as the

Accepted Answer

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

Question 17

Which of the following is the largest source of revenue for the U.S.federal government?

Accepted Answer

A) the individual income tax 
B) social insurance taxes 
C) sales taxes 
D) property taxes

Question 18

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.

Question 19

Figure 18-6
  
Figure 18-6 shows the Lorenz curves for Islandia and Syldavia.
-Refer to Figure 18-6.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 20

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.

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