Question 1

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

Accepted Answer

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

Question 2

A statistical tool used to measure inequality is

Accepted Answer

A)  the Lorenz curve. 
B)  the Gini coefficient. 
C)  the absolute poverty rate. 
D)  the relative poverty rate.

Question 3

Compare the distribution of income in the United States with the distribution of income in other high-income countries.

Accepted Answer

The answer of Compare the distribution of income in the...

Question 4

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.

Question 5

The median voter theorem states that the outcome of a majority vote is likely to represent the preferences of the voter who is in the political middle.

Accepted Answer

A) True 
 B)False

Question 6

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 7

If official poverty statistics for the United States included transfer payments individuals receive from the government,such as Social Security payments and other non-cash benefits such as food stamps,

Accepted Answer

A)  the poverty rate would be lower. 
B)  poverty would be eliminated. 
C)  income inequality would be greater. 
D)  the poverty rate would be overstated.

Question 8

The Gini coefficient is measured by

Accepted Answer

A)  summing up the cumulative income percentages on the Lorenz curve. 
B)  summing up the total income earned by the population and dividing by the size of the population. 
C)  using the formula: area between perfect inequality and Lorenz curve ÷ area between the line of perfect equality to the Lorenz curve. 
D)  using the formula: area between the line of perfect equality and the Lorenz curve ÷ the area under the line of perfect equality.

Question 9

Between 1980 and 2011,income inequality in the United States has increased in part due to expanding international trade.How does expanding international trade contribute to income inequality?

Accepted Answer

A)  It increases the demand for a wide array of products which in turn increases prices beyond the reach of average income individuals. 
B)  It allows producers to exploit workers and reduce the wages they are willing to pay workers. 
C)  Domestic firms can now hire low-skilled workers anywhere in the world, putting U.S. workers in competition with foreign workers. This has caused the wages of unskilled workers to be depressed relative to the wages of other workers. 
D)  It reduces the cost of producing goods and therefore lowers the value of labor's services.

Question 10

Table 18-6
  Table 18-6 shows the income tax brackets and tax rates for single taxpayers in Calpernia.
-Refer to Table 18-6.Calculate the income tax paid by Sasha,a single taxpayer with an income of $60,000.

Accepted Answer

A)  $22,800 
B)  $14,399 
C)  $13,800 
D)  $13,642

Question 11

Which of the following statements refers to rent seeking?

Accepted Answer

A)  "Laws passed by the federal government often provide benefits for a small number of individuals. These individuals, in turn, have an incentive to contribute to the campaigns of politicians who pass these laws." 
B)  "The federal government should spend more money on programs that help low income citizens and less money on national defense." 
C)  "The role of the federal government in the U.S. economy grew significantly after the Great Depression. Government spending and taxes are a much greater proportion of total income today than they were in 1929." 
D)  "There is an opportunity cost whenever the federal government spends tax revenue. For example, an additional $1 billion spent on national defense means there will be less revenue for highway construction and maintenance or some other program."

Question 12

Between 1970 and 2006,the poverty rate in East Asia declined dramatically from about 60 percent to less than 2 percent,while the poverty rate in Sub-Saharan Africa decreased from 40 percent to only 32 percent.The main reason for this is that

Accepted Answer

A)  the population growth rate decreased in East Asia and increased in Sub-Saharan Africa. 
B)  Governments in East Asia increased transfer payments to poor families over this period of time. The governments of Sub-Saharan Africa had practically no transfer payment programs from 1970 to 2006. 
C)  The countries of East Asia have progressive income tax systems. The countries of Sub-Saharan Africa all have regressive income tax systems. 
D)  East Asia experienced higher economic growth than Sub-Saharan Africa.

Question 13

Suppose the government imposes an 8 percent sales tax on clothing items and the tax is levied on sellers.Who pays for the tax in this situation? (Assume that the demand curve is downward-sloping and that the supply curve is upward-sloping.)

Accepted Answer

A)  The tax is borne entirely by the sellers. 
B)  The sellers will pass on the entire sales tax to consumers and therefore the consumers bear the tax. 
C)  The tax will be borne partly by consumers and partly by sellers. 
D)  It is not possible to answer the question without information on price elasticities.

Question 14

Which of the following summarizes the information provided by a Lorenz curve?

Accepted Answer

A)  the Lorenz coefficient 
B)  the income distribution ratio 
C)  the Gini coefficient 
D)  the slope (the rise divided by the run) of the Lorenz curve at a particular point on the curve

Question 15

The largest source of revenue for the federal government of the United States is from

Accepted Answer

A)  tariffs collected on imported goods. 
B)  property taxes imposed on private property. 
C)  sales taxes on items purchased for consumption. 
D)  individual income taxes.

Question 16

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 17

Article Summary
In 2012, Colorado and Washington legalized marijuana for recreational use, and one of the major selling points in each state's pro-marijuana campaign was the possibility of generating millions of dollars in tax revenue from sales which could be used for funding general education. The Colorado legislature was weighing a proposal to tax marijuana at 30 percent, of which 15 percent would be a sales tax on consumers and 15 percent an excise tax on growers. Washington has set a tax rate of 44 percent on consumers and 25 percent each for growers and retailers. Since the legalization of marijuana is relatively new, projecting the economic impact of its sale is difficult, leading to many questions as to the quantities that will be produced and sold and what actual tax revenues will be generated.
Source: Elizabeth Dwoskin, "Colorado and Washington Try to Figure Out How to Tax Marijuana," Bloomberg Businessweek, April 26, 2013.
-Refer to the Article Summary.Colorado is weighing a proposal to tax marijuana at 30 percent,of which 15 percent would be a sales tax on consumers and 15 percent would be an excise tax on growers.Suppose the actual burden of the tax falls 80 percent on consumers and 20 percent on producers.In this case,consumers will actually bear the tax burden of ________ percent of the selling price and producers will actually bear the tax burden of ________ percent of the selling price.

Accepted Answer

A)  24; 6 
B)  50; 50 
C)  15; 15 
D)  80; 20

Question 18

If the government wants to minimize the welfare loss of a tax,it should tax goods with more inelastic demands or supplies.

Accepted Answer

A) True 
 B)False

Question 19

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 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

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

A statistical tool used to measure inequality is

Compare the distribution of income in the United States with the distribution of income in other high-income countries.

Figure 18-1 -Refer to Figure 18-1.Area E+H represents

The median voter theorem states that the outcome of a majority vote is likely to represent the preferences of the voter who is in the political middle.

As a group,people with high incomes are likely to have

If official poverty statistics for the United States included transfer payments individuals receive from the government,such as Social Security payments and other non-cash benefits such as food stamps,

The Gini coefficient is measured by

Between 1980 and 2011,income inequality in the United States has increased in part due to expanding international trade.How does expanding international trade contribute to income inequality?

Table 18-6 Table 18-6 shows the income tax brackets and tax rates for single taxpayers in Calpernia. -Refer to Table 18-6.Calculate the income tax paid by Sasha,a single taxpayer with an income of $60,000.

Which of the following statements refers to rent seeking?

Between 1970 and 2006,the poverty rate in East Asia declined dramatically from about 60 percent to less than 2 percent,while the poverty rate in Sub-Saharan Africa decreased from 40 percent to only 32 percent.The main reason for this is that

Suppose the government imposes an 8 percent sales tax on clothing items and the tax is levied on sellers.Who pays for the tax in this situation? (Assume that the demand curve is downward-sloping and that the supply curve is upward-sloping.)

Which of the following summarizes the information provided by a Lorenz curve?

The largest source of revenue for the federal government of the United States is from

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

If the government wants to minimize the welfare loss of a tax,it should tax goods with more inelastic demands or supplies.

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