Principles of Micro HW 14

Logrolling may result in

a majority of Congress supporting legislation that benefits the economic interests of a few, while harming the economic interests of a much larger group.

What is logrolling?

a situation where a policymaker votes to approve a bill in exchange for favorable votes from his colleagues on other bills

The public choice model

applies economic analysis to government decision making.

According to public choice theory, policymakers

are likely to pursue their own self-interest, even if their self-interest conflicts with the public interest.

The public choice model assumes that government policy makers

are likely to pursue their own self-interests, even if their self-interests conflict with the public interest.

What are the two types of taxes that working individuals pay on their earnings?

individual income tax and social insurance taxes

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

the excess burden of the sales tax.

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

the median voter theorem.

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

may often lead to an inefficient outcome in representing consumer preferences compared to the private market for goods and services

What is the voting paradox?

the observation that majority voting may not always result in consistent choices

Refer to Figure 18-1. Area B+C represents

the portion of sales tax revenue borne by consumers.

Refer to Figure 18-1. Area F+G represents

the portion of sales tax revenue borne by producers.

Refer to Figure 18-1. The sales tax revenue collected by the government is represented by the area

B+C+F+G.

What is regulatory capture?

It is a situation in which a firm being regulated successfully influences the regulatory agency's actions to benefit the interests of the firm, rather than the public interest.

Refer to Figure 18-1. The excess burden of the tax is represented by the area

E+H.

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

F+G.

Policymakers focus on marginal tax rate changes when making changes in the tax code because the marginal tax rate

affects people's willingness to work, save, and invest.

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

b+c

Tax laws affect

both efficiency and equity.

A marginal tax rate is calculated as

change in taxes paid ÷ the change in total taxable income.

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

engaging in aggressive advertising that slams a competitor's product

The largest percentage of federal income tax revenue in the United States is paid by the

highest income taxpayers.

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.

Public schools in the United States get most of their operating funds from

local property taxes.

The Arrow impossibility theorem states that

no system of voting can be devised that will always consistently represent the underlying preferences of voters.

If, as your taxable income decreases, you pay a smaller percentage of your taxable income in taxes, then the tax is

progressive.

The federal corporate income tax is

progressive.

The median voter theorem will be an accurate predicator of the outcomes of elections

regardless of whether preferences among voters are similar or different from those of the median voter.

An average tax rate is calculated as

taxes paid ÷ total taxable income.

Gasoline taxes that are typically used for highway construction and maintenance are consistent with which of the following principles of taxation?

the benefits-received principle