Question 1

Which of the following is not an example of rent-seeking behavior?

Accepted Answer

A) competition for subsidies 
B) lobbying the government to impose tariffs on certain imported products 
C) competition for the exclusive right to import a product 
D) engaging in aggressive advertising that slams a competitor's product

Question 2

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 3

Table 18-4
 
-Refer to Table 18-4.The table above outlines the rankings of three members of the U.S.House of Representatives on three spending alternatives.Assume that Congress can spend additional revenue on only one of the three spending alternatives and that Tom, Dick, and Harriet, all members of the House of Representatives, participate in a series of votes in which they are to determine which of the spending alternatives should receive funding.Three votes will be taken: (1)Foreign Aid and Post-Secondary Education (2)Foreign Aid and Roads and Bridges and (3)Post-Secondary Education and Roads and Bridges.
Determine whether the voting paradox will occur as a result of these votes.

Accepted Answer

The answer of Table 18-4
 
-Refer to Table 18-4.The table...

Question 4

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 5

Economists James Buchanan and Gordon Tullock are well-known for developing

Accepted Answer

A) the impossibility theorem. 
B) the voting paradox. 
C) the public choice model. 
D) the concept of government failure.

Question 6

For a given supply curve, the deadweight loss from the imposition of a tax is smaller if demand is more elastic.

Accepted Answer

A) True 
 B)False

Question 7

Figure 18-6
  
Figure 18-6 shows the Lorenz curves for Islandia and Syldavia.
-Refer to Figure 18-6.Which country has the more unequal distribution of income?

Accepted Answer

A) Islandia 
B) Syldavia 
C) They may have the same absolute income distribution although their relative income distribution is different. 
D) There is insufficient information to answer the question.

Question 8

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

Accepted Answer

A) leads 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 9

If grocery stores were legally required to charge a 10-cent fee for disposable grocery bags, who would bear the largest burden of this fee?

Accepted Answer

The answer of If grocery stores were legally required to...

Question 10

A tax is efficient if

Accepted Answer

A) individuals with the lowest incomes pay proportionately lower taxes than individuals with the highest incomes. 
B) it is based on profits earned and not on wages. 
C) it encourages saving and investment. 
D) it imposes a small excess burden relative to the revenue it raises.

Question 11

Which of the following is a transfer payment?

Accepted Answer

A) the food stamp program 
B) a tax deduction 
C) Social Security payments 
D) an income tax credit

Question 12

The Arrow impossibility theorem explains

Accepted Answer

A) why there is no system of voting that will consistently represent the underlying preferences of voters. 
B) why government regulation of private markets will always result in a reduction in economic efficiency in these markets. 
C) why voters are always rationally ignorant. 
D) why it is not possible to provide the economically efficient amount of any public good.

Question 13

When the majority of voters have preferences very different from those of the median voter, then the median voter theorem will lead to accurate predictions of the outcomes of elections.

Accepted Answer

A) True 
 B)False

Question 14

The corporate income tax is ultimately paid by all of the following except

Accepted Answer

A) owners of the corporation. 
B) the corporation's debtors in the form of lower rates of return on the corporation's bonds. 
C) customers in the form of higher prices. 
D) employees in the form of lower wages.

Question 15

Figure 18-1
 
-Refer to Figure 18-1.Of the tax revenue collected by the government, the portion borne by producers is represented by the area

Accepted Answer

A) B + C. 
B) F + G. 
C) E + H. 
D) B + C + F + G.

Question 16

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 17

If the marginal tax rate is equal to the average tax rate as taxable income increases, the tax structure is

Accepted Answer

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

Question 18

What does a Lorenz curve illustrate?

Accepted Answer

A) a comparison of the distribution of income in two different countries 
B) the distribution of income within a country in a given time period 
C) the share of taxes paid by different groups of households 
D) the change over time in the percentage of households with incomes that place them below the poverty line

Question 19

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.

Question 20

The person or firm that pays a tax bears the burden of the tax.

Accepted Answer

A) True 
 B)False

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

Which of the following is not an example of rent-seeking behavior?

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.

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

Economists James Buchanan and Gordon Tullock are well-known for developing

For a given supply curve, the deadweight loss from the imposition of a tax is smaller if demand is more elastic.

Figure 18-6 Figure 18-6 shows the Lorenz curves for Islandia and Syldavia. -Refer to Figure 18-6.Which country has the more unequal distribution of income?

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

If grocery stores were legally required to charge a 10-cent fee for disposable grocery bags, who would bear the largest burden of this fee?

A tax is efficient if

Which of the following is a transfer payment?

The Arrow impossibility theorem explains

When the majority of voters have preferences very different from those of the median voter, then the median voter theorem will lead to accurate predictions of the outcomes of elections.

The corporate income tax is ultimately paid by all of the following except

Figure 18-1 -Refer to Figure 18-1.Of the tax revenue collected by the government, the portion borne by producers is represented by the area

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

If the marginal tax rate is equal to the average tax rate as taxable income increases, the tax structure is

What does a Lorenz curve illustrate?

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

The person or firm that pays a tax bears the burden of the tax.