chapter 9 econ
Why are there two different views on the effect of taxation on labor supply in the United States?
-It depends on normative questions such as how much to tax or how much government intervention is necessary. -The effect of a tax on labor supply depends on the elasticity of labor supply. -The effect of a tax on labor supply depends on the amount of deadweight loss created by the tax.
In a society approaching perfect equality (everybody having the same income), the Gini coefficient would be
0
example of proportional tax
medicare tax
Which of the following is a problem that black markets pose in an economy?
participants use resources to evade the law
To reduce inequality and poverty in an economy, the government uses a
progressive tax system to fund transfer payments.
example of regressive tax
property tax
Which of the following is not a factor that influences government taxation and spending decisions?
Correcting post-tax income distribution
Which of the following is a factor underlying government taxation and spending decisions?
To raise revenues to pay for operations
The largest source of revenue for the federal government is
individual income taxes.
A tax imposed on sellers will cause the supply curve to shift __________ The more elastic the supply curve, the more tax incidence falls on ________
up, consumers
Examples of direct regulation include
zoning restrictions, price floors, laws restricting alcohol purchases
A black market is
a nonlegal market for regulated goods and services
A price ceiling placed below the equilibrium price would result in excess __________. this is referred to a __________
demand, shortage
The sources of revenue for state and local governments are ________ those of the federal government
different from
Example of progressive tax is
income tax
Lump-sum taxes are
regressive
Tax incidence refers to
who bears the burden of a tax.
Which of the following is an example of the opportunity cost of government bureaucracies?
A tax collector who was qualified to produce motherboards
Consumer sovereignty suggests that
government should not interfere with consumer choices.
Government spending in the United States has grown over time and now accounts for more than 40 percent of U.S. national income. Does this mean that government has been consistently running a budget deficit?
No, government deficits depend upon spending and tax revenue.
Which of the following is a cost associated with government intervention in an economic system?
beuracracies (corruption)
Direct regulation is
direct actions by the government to control the amount of an activity
A price floor placed below the equilibrium price would __________ the market. If the price floor was set above the equilibrium price it would ______________ the market. A price floor reallocates surplus to _____________
have no effect on the market, create a surplus, producers
In competitive markets, tax incidence, as well as the equilibrium, is independent of whether the tax is imposed on consumers or sellers because
if it is imposed on the seller, the seller will raise the price and pass it to the consumer.
Which of the following is not a consequence of high levels of taxation?
increased immigration of foreign high earners
The government runs a government surplus when
tax revenue exceed its spending
Black markets often _____________ the ban on illegal goods and services. Another facet of underground economies, tax evasion, __________________ legitimate businesses and can result in governments levying ___________ taxes.
undermine, harms, higher
FDA regulations aimed at ensuring that new drugs that are marketed do, in fact, have the functions they are supposed to have are necessary because
verification by each consumer would be extremely inefficient.
________________ represent the largest portion of the money the U.S. government collects in tax revenues. ____________ tax receipts represent a third of the federal government's tax revenue and are taxes on ________
Individual Income Taxes, Social Insurance, Wages
How would you depict the trade-off between equity and efficiency on a graph?
Inequality on one axis and social surplus on the other with a positively-sloped function.
Which of the following is the largest source of revenue for state governments
Miscellaneous taxes and fees, such as tolls on roads and public transportation tickets.
Is the deadweight loss of taxation the same for different types of taxes?
No, it differs according to how taxes change incentives
Is the entire burden of the tax always borne by those on whom it is imposed?
Not necessarily, since the burden of the tax depends on price elasticity.
When tax rates increase, the deadweight loss of taxation increases by ___________________ This implies that, all else being equal, it is better to have ________________ rather than _________________
a greater amount, many small tax resources, than one large source
If government tax revenues are $6.6 trillion and government spending is $7.5 trillion, the government is running a
budget deficit
If government tax revenues are $5.9 trillion and government spending is $5.8 trillion, the government is running a
budget surplus
What types of goods are likely to be traded in a black market?
drug dealing, prostitution
Economies with lower taxes _________________ production and ________________ available social surplus. One possible cost of such economies is that the gap between the rich and poor may _______________
encourage, increase, increase
A progressive tax system is one in which tax rates ___________ as taxable base income increases. In a regressive tax system, higher earners pay ________ marginal tax rates
increase, lower
Economists toward the paternalistic end of the spectrum would probably say that some mistakes result from the fact that:
individuals are not used to making decisions of a certain type.
Educational grants afforded to poorer developing countries are often:
ineffective because government officials often misuse the funds.
Based on the income tax brackets in the table beside, an individual with an income of $65 comma 000 would pay $9 comma 288.45 in income taxes. In this case the individual's average tax rate is _________ their marginal tax rate : For individuals whose income puts them in all but the lowest tax bracket, their average tax rate is lower than their marginal rate.
lower
Paternalism is the view that
people do not always know what is best for them, and government should encourage them to make the right choices.
Which of the following could influence the relationship between inequality and social surplus and move an economy from Point A to Point B on the curve?
raising marginal corporate taxes
Given that there are costs involved with government intervention in an economy, governments still choose to intervene in markets to
reduce inequality
The equity-efficiency trade-off states that when social inequality is high, further increases in inequality_______________ social surplus. The flatter the equity-efficiency curve, the _______________ the cost of reducing social inequality in terms of social surplus.
reduce, greater
The primary types of tax systems are
regressive, proportional, progressive
Which of the following is not an example of paternalism?
repealing the Affordable Health Care Act
A government would want to be on this curve where
there is no correct answer to this question, as the answer depends on a government's value judgments.