Sales Tax Reco

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					Chapter 17

4. Majority voting fails to incorporate the strength of the preferences of the individual
voter and therefore:
A. Reduces the power of the median voter
B. Is the primary reason for public sector failure
C. May produce economically inefficient outcomes
D. Creates the opportunity for the fallacy of limited decisions

5. Assume that Ricardo, Sam, and Teresa are the only citizens in a community. A
proposed public good has a total cost of $1000. All three citizens will share an equal
portion of this cost in taxes. The benefit of the public good is $500 for Ricardo, $250 for
Sam, and $250 for Teresa. In a majority vote, this proposal will most likely be:
A. Accepted and resources will be under allocated to this public good
B. Defeated and resources will be over allocated to this public good
C. Accepted and resources will be over allocated to this public good
D. Defeated and resources will be under allocated to this public good



6. Assume that Abby, Ben, and Clara are the only citizens in a community. A proposed
public good has a total cost of $1000. All three citizens will share an equal portion of this
cost in taxes. The benefit of the public good is $400 each for Abby, Ben, and Clara. In a
majority vote, this proposal will most likely be:
A. Accepted and resources will be under allocated to this public good
B. Defeated and resources will be over allocated to this public good
C. Accepted and resources will be over allocated to this public good
D. Defeated and resources will be under allocated to this public good
13. Refer to the above table. In a choice between a stadium and a park:
A. A majority of the voters favor the park
B. A majority of the voters favor the stadium
C. A majority of the voters favor both the stadium and the park
D. There is not a majority of voters for either the stadium or the park
14. Refer to the above table. In a choice between a jail and a stadium:
A. A majority of the voters favor the jail
B. A majority of the voters favor the stadium
C. A majority of the voters favor both the jail and the stadium
D. There is not a majority of voters for either the jail or the stadium

15. Refer to the above table. In a choice between a park and a jail:
A. A majority of voters favor the jail
B. A majority of voters favor the park
C. A majority of voters favor both the jail and the park
D. There is not a majority of voters for either the jail or the park

19. The median-voter model indicates that political parties will:
A. Target only those voters who can be influenced by rent-seeking
B. Direct their work to voters who can be influenced by special interests
C. Campaign at one end of the distribution of voter sentiments
D. Try to appeal to the sentiments of the voter holding the middle position

 25. Rent-seeking behavior refers to:
A. A situation where government lowers rents on public housing to reduce poverty
B. The trading of votes to secure favorable outcomes on decisions which would otherwise
be adverse
C. The pursuit through government of a transfer of income or wealth at someone else's or
society's expense
D. A situation where voting by majority rule fails to provide a consistent ranking of
society's preferences for public goods and provides income to private parties

33. A Federal excise tax on each tire purchased would be an example of the:
A. Benefits-received principle of taxation
B. Ability-to-pay principle of taxation
C. Law of comparative advantage
D. Fallacy of limited decisions

41. A tax is regressive if it:
A. Takes a higher percentage of income as income increases
B. Takes the same percentage of income regardless of income level
C. Takes a smaller percentage of income as income increases
D. Is levied on consumers

44. A regressive tax means that if someone earning $25,000 pays $5,000, someone
earning $50,000 must pay:
A. Less than $5,000
B. Less than $10,000
C. More than $10,000 but less than $15,000
D. More than $15,000 but less than $20,000
63. The Federal personal income tax:
A. Is regressive
B. Is significantly less progressive than official tax rates would indicate because of
various tax exemptions and deductions
C. Has become extremely progressive as a result of taxpayers' being pushed into higher
tax brackets by higher income levels
D. Has experienced substantial increases in rates during the past two years

64. Social Security taxes are regressive because:
A. The Social Security tax rate increases as income increases
B. No Social Security tax is collected for incomes in excess of a set income level
C. Each individual must pay a set percentage of his or her income in Social Security taxes
D. As income increases, the Social Security tax rate increases at a decreasing rate

68. The burden of a specific sales tax falls entirely on the consumer when the:
A. Elasticity of supply is zero
B. Demand curve is perfectly elastic
C. Price elasticity of demand is less than the elasticity of supply
D. Price elasticity of demand is zero

73. Suppose that a $.25 tax is placed on cigarettes. Under what circumstances will
cigarette producers pay the full amount of the tax?
A. If supply is perfectly elastic
B. If demand is perfectly inelastic
C. If supply is perfectly inelastic
D. The consumer and the seller always share the burden of the tax

74. The economic tax incidence is shifted forward to the consumer to a larger extent the:
A. Larger the price elasticity of supply and demand
B. Smaller the price elasticity of demand and supply
C. Larger the price elasticity of supply and the smaller the price elasticity of demand
D. Larger the price elasticity of demand and the smaller the price elasticity of supply
A supply and demand graph for a product on which an excise tax has been imposed by
government.




95. Refer to the above graph. What is the amount of the excise tax in terms of price per
unit sold?
A. $5
B. $6
C. $8
D. $11



96. Refer to the above graph. What is the total amount of tax revenue going to the
government?
A. $9
B. $21
C. $42
D. $51

97. Refer to the above graph. What is the area that represents the total amount of tax
revenue going to the government?
A. WXTV
B. WXZU
C. VTZU
D. WXYZU
98. Refer to the above graph. What is the portion of the excise tax paid that is the real tax
burden for consumers in terms of price per unit sold?
A. $3
B. $5
C. $6
D. $8



99. Refer to the above graph. What is the amount of the excise tax that is the real burden
for consumers?
A. $9
B. $21
C. $42
D. $51



100. Refer to the above graph. What is the area that represents the portion of the excise
tax that is a real burden to consumers?
A. WXTV
B. WXZU
C. VTZU
D. WXYZU



101. Refer to the above graph. What is the portion of the excise tax paid that is the real
tax burden for producers in terms of the price per unit sold?
A. $3
B. $5
C. $6
D. $8

102. Refer to the above graph. What is the amount of the excise tax that is the real burden
for producers?
A. $9
B. $21
C. $42
D. $51
103. Refer to the above graph. What is the area that represents the portion of the excise
tax that is a real burden to producers?
A. WXTV
B. WXZU
C. VTZU
D. VYZU



104. Refer to the above graph. The excise tax on this product as shown in the graph is
ultimately paid:
A. 100 percent by consumers
B. 100 percent by producers
C. 75 percent by consumers and 25 percent by producers
D. 50 percent by consumers and 50 percent by producers



105. Refer to the above graph. What is the efficiency loss with this excise tax?
A. $6
B. $9
C. $18
D. $21
106. Refer to the above graph. What is the area that represents the efficiency loss of the
tax?
A. XYT
B. XYZ
C. WXZU
D. WXYZU

107. Refer to the above graph. What is the total tax burden (tax payment plus efficiency
loss) for society from this excise tax?
A. $21
B. $42
C. $51
D. $60

108. Refer to the above graph. What is the area that represents the total tax burden (tax
payment plus efficiency loss) for society from this excise tax?
A. VYZU
B. XYZ
C. WXZU
D. WXYZU

134. The overall tax system in the United States is:
A. Highly progressive
B. Slightly progressive
C. Slightly regressive
D. More progressive than fifteen years ago

 135. If the tax structures of state and local governments were combined with the Federal
tax structure, the overall tax structure in the nation would best be characterized as:
A. Highly progressive
B. Highly regressive
C. Slightly progressive
D. Mildly regressive

136. Which statement best describes the overall tax and transfer structure of the United
States?
A. Our tax system makes the after-tax distribution of income much more equal than the
before-tax distribution
B. Our tax system does not significantly reallocate income, but transfer payments
substantially reduce income inequality
C. Although some Federal taxes are progressive, this effect is more than offset by the
regressivity of state and local taxes which make the overall system extremely regressive
D. Recent changes in corporate income taxes and payroll taxes have made our overall tax
system more progressive

				
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