Question 1

The public choice model assumes that government policy makers

Accepted Answer

A)  must promote the public interest at the expense of their own self-interests in order to be re-elected.
B)  will pursue their self-interests in personal affairs but only if it does not conflict with the public interest.
C)  will often act irrationally in their personal affairs,but will act rationally when they promote the public interest.
D)  are likely to pursue their own self-interests,even if their self-interests conflict with the public interest.E) C) and D)
F) All of the above

Question 2

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.E) A) and C)
F) A) and D)

Question 3

"For a given supply curve,the excess burden of a tax will be greater when the demand for a product is less elastic than when the demand is more elastic." This statement is

Accepted Answer

A)  correct.
B)  incorrect because the incidence of the tax,not the burden of the tax,is affected by the elasticity of demand.
C)  incorrect.When demand is less elastic,the burden of the tax is smaller than when the demand is more elastic.
D)  incorrect.The statement confuses demand with quantity demanded.E) C) and D)
F) None of the above

Question 4

The term tax incidence refers to

Accepted Answer

A)  the degree of progression of a tax.
B)  the actual division of the burden of a tax between buyers and sellers in a market.
C)  the amount of revenue government collects from a tax imposed on a good or service.
D)  whether the burden of a tax rests more heavily on those with higher incomes or those with lower incomes.E) None of the above
F) All of the above

Question 5

The public choice model can be used to examine voting models that contrast the manner in which collective decisions are made by governments (state,local and federal) and the manner in which individual choices are made in markets.Which of the following descriptions is consistent with the difference between collective decision-making and decision-making in markets?

Accepted Answer

A)  Everyone who votes must agree with a decision made collectively through government,but in markets individuals can make their own choices.
B)  Individuals are less likely to see their preferences represented in the outcomes of government policies than in the outcomes of markets.
C)  The cost of a government policy is determined by a majority vote of members of the public; decisions made in markets are based on individual willingness to pay.
D)  Choices made through government policies are more important than decisions individuals make through markets.E) B) and D)
F) All of the above

Question 6

The public choice model raises questions about the government's ability to regulate economic activity efficiently.Which of the following statements represents the views of most economists with regard to the role of government?

Accepted Answer

A)  Congress should abolish the Food and Drug Administration,the Environmental Protection Agency and other agencies and commissions because the costs of their actions exceed the benefits they provide to the public.
B)  Government should do more to regulate markets.The public choice model has shown that rent seeking and rational ignorance affect more markets than are currently subject to regulation.
C)  U.S.citizens can afford more government regulation if the cost of this regulation is borne mostly by taxpayers with the highest incomes.
D)  Agencies such as the Food and Drug Administration and the Environmental Protection Agency can serve a useful purpose,but we need to take the costs of regulation into account along with the benefits.E) B) and C)
F) All of the above

Question 7

A Gini coefficient of ________ means that an income distribution is perfectly equal and a Gini coefficient of ________ means the income distribution is perfectly unequal.

Accepted Answer

A)  0; 1
B)  1; 0
C)  0,100
D)  100,0E) A) and B)
F) C) and D)

Question 8

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.E) All of the above
F) A) and D)

Question 9

How would the elimination of a sales tax affect the market for a product that had been subject to the tax?

Accepted Answer

A)  The demand for the product would rise and the equilibrium price would fall by the amount of the tax.
B)  The equilibrium price for the product would fall by less than the amount of the tax.
C)  The reduction in government revenue from the tax would be made up by an increase in property taxes.
D)  The supply of the product would become more elastic.E) A) and D)
F) B) and C)

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

If you pay $14,000 in taxes on an income of $125,000,and $17,400 in taxes on an income of $144,000,what is your marginal tax rate? Show your work.

Accepted Answer

Marginal tax rate = ...

Question 12

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 13

The Gini coefficient for the United States in 1980 was 0.403.In 2011,the coefficient was equal to 0.468.This means that

Accepted Answer

A)  per capita income in the United States rose from 1980 to 2011.
B)  there was a decrease in the amount of government transfer payments from 1980 to 2011.
C)  cuts in federal income tax rates in the early 1980s and 2001 helped to reduce income inequality.
D)  income inequality increased from 1980 to 2011.E) A) and D)
F) All of the above

Question 14

What is meant by "tax incidence"?

Accepted Answer

Tax incidence refers to the ac...

Question 15

The federal government defines the poverty line as

Accepted Answer

A)  a level of annual income equal to the amount necessary to purchase the minimal quantity of food required for adequate nutrition.
B)  a level of annual income equal to three times the amount of money necessary to purchase the minimal quantity of food required for adequate nutrition.
C)  the average income level of welfare recipients.
D)  an annual income of $11,800 for a family of four in 2011.E) All of the above
F) A) and B)

Question 16

Some individuals seek to use government action to make themselves better off at the expense of others.The actions of these individuals

Accepted Answer

A)  are examples of fraud; but these individuals usually avoid prosecution because of logrolling and rational ignorance.
B)  are examples of rent seeking.
C)  offer proof that Adam Smith's "invisible hand" is not valid.
D)  are evidence of the voting paradox.E) B) and D)
F) C) and D)

Question 17

What is the term that explains why voters often lack knowledge of pending legislation,and lack knowledge of the views of candidates for office on a range of issues that affect their own (the voters') welfare?

Accepted Answer

A)  the voting paradox
B)  logrolling
C)  rational ignorance
D)  regulatory captureE) A) and D)
F) C) and D)

Question 18

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.E) None of the above
F) A) and B)

Question 19

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 creditE) None of the above
F) A) and B)

Question 20

Both presidents Kennedy and Reagan proposed significant cuts in income taxes.Opponents of these tax cut proposals argued that

Accepted Answer

A)  the tax cuts would benefit high-income taxpayers.
B)  cutting state sales taxes,rather than federal income taxes,would result in greater economic efficiency.
C)  while the tax cuts would result in greater economic efficiency,there was too much opposition to the tax cuts in Congress.As it turned out,Congress ultimately approved both tax cut proposals.
D)  it would be better to cut taxes on corporate profits.E) C) and D)
F) B) and D)

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

The public choice model raises questions about the government's ability to regulate economic activity efficiently.Which of the following statements represents the views of most economists with regard to the role of government?

Correct Answer
verified

What is meant by "tax incidence"?

Correct Answer
verified
Tax incidence refers to the ac...
View Answer

Correct Answer
verified

The public choice model assumes that government policy makers

Correct Answer
verified

How would the elimination of a sales tax affect the market for a product that had been subject to the tax?

Correct Answer
verified

The term tax incidence refers to

Correct Answer
verified

The Arrow impossibility theorem explains

Correct Answer
verified

Both presidents Kennedy and Reagan proposed significant cuts in income taxes.Opponents of these tax cut proposals argued that

Correct Answer
verified

What is the term that explains why voters often lack knowledge of pending legislation,and lack knowledge of the views of candidates for office on a range of issues that affect their own (the voters') welfare?

Correct Answer
verified

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.

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

The Gini coefficient for the United States in 1980 was 0.403.In 2011,the coefficient was equal to 0.468.This means that

Correct Answer
verified

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

Correct Answer
verified

Which of the following is a transfer payment?

Correct Answer
verified

A Gini coefficient of means that an income distribution is perfectly equal and a Gini coefficient of means the income distribution is perfectly unequal.

Correct Answer
verified

Some individuals seek to use government action to make themselves better off at the expense of others.The actions of these individuals

Correct Answer
verified

The federal government defines the poverty line as

Correct Answer
verified

"For a given supply curve,the excess burden of a tax will be greater when the demand for a product is less elastic than when the demand is more elastic." This statement is

Correct Answer
verified

If you pay $14,000 in taxes on an income of $125,000,and $17,400 in taxes on an income of $144,000,what is your marginal tax rate? Show your work.

Correct Answer
verified
Marginal tax rate = ...
View Answer

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

The public choice model raises questions about the government's ability to regulate economic activity efficiently.Which of the following statements represents the views of most economists with regard to the role of government?

Correct AnswerverifiedShow Answer

What is meant by "tax incidence"?

Correct AnswerverifiedTax incidence refers to the ac...View AnswerShow Answer

Correct AnswerverifiedShow Answer

The public choice model assumes that government policy makers

Correct AnswerverifiedShow Answer

How would the elimination of a sales tax affect the market for a product that had been subject to the tax?

Correct AnswerverifiedShow Answer

The term tax incidence refers to

Correct AnswerverifiedShow Answer

The Arrow impossibility theorem explains

Correct AnswerverifiedShow Answer

Both presidents Kennedy and Reagan proposed significant cuts in income taxes.Opponents of these tax cut proposals argued that

Correct AnswerverifiedShow Answer

What is the term that explains why voters often lack knowledge of pending legislation,and lack knowledge of the views of candidates for office on a range of issues that affect their own (the voters') welfare?

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The Gini coefficient for the United States in 1980 was 0.403.In 2011,the coefficient was equal to 0.468.This means that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is a transfer payment?

Correct AnswerverifiedShow Answer

A Gini coefficient of ________ means that an income distribution is perfectly equal and a Gini coefficient of ________ means the income distribution is perfectly unequal.

Correct AnswerverifiedShow Answer

Some individuals seek to use government action to make themselves better off at the expense of others.The actions of these individuals

Correct AnswerverifiedShow Answer

The federal government defines the poverty line as

Correct AnswerverifiedShow Answer

"For a given supply curve,the excess burden of a tax will be greater when the demand for a product is less elastic than when the demand is more elastic." This statement is

Correct AnswerverifiedShow Answer

If you pay $14,000 in taxes on an income of $125,000,and $17,400 in taxes on an income of $144,000,what is your marginal tax rate? Show your work.

Correct AnswerverifiedMarginal tax rate = ...View AnswerShow Answer

Correct Answer
verified

Correct Answer
verified
Tax incidence refers to the ac...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified

A Gini coefficient of means that an income distribution is perfectly equal and a Gini coefficient of means the income distribution is perfectly unequal.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Marginal tax rate = ...
View Answer