Econ 202 pearson chapter 10

How would you depict the​ trade-off between equity and efficiency on a​ graph? A government would want to be on this curve where​ ___________.

-Inequality on one axis and social surplus on the other with a​ positively-sloped function. -there is no correct answer to this​ question, as the answer depends on a​ government's value judgments.

Which of the following are examples of inefficiencies created by government​ intervention? ​(Check all that apply​.) Which of the following is not a result of​ corruption?

-Quality deterioration in a market after government implements a price control -Creating a large workforce of professionals who review whether the financial reports of companies are true and fair. -Selling goods at a price that does not include taxes.

Paternalism is the view that​ ___________. Consumer sovereignty suggests that​ ____________.

-people do not always know what is best for​ them, and government should encourage them to make the right choices. -government should not interfere with consumer choices.

In a society approaching perfect equality​ (everybody having the same​ income), the Gini coefficient would be

0

If government tax revenues are ​$6.6 trillion and government spending is ​$7.1 trillion, the government is running a

budget deficit

The government runs a budget surplus when​ ____________.

tax revenue exceeds its spending.

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

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.

Tax incidence refers to​ ____________. Is the entire burden of the tax always borne by those on whom it is​ imposed?

who bears the burden of a tax. Not​ necessarily, since the burden of the tax depends on price elasticity.

Which of the following is not an example of​ paternalism?

-repealing the Affordable Health Care Act Your answer is correct.

Which of the following is not a consequence of high levels of​ taxation?

-increased immigration of foreign high earners

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 sources -one large tax source

Which of the following is a factor underlying government taxation and spending​ decisions?

To raise revenues to pay for operations. This is the correct answer.

To reduce inequality and poverty in an​ economy, the government uses a​ ___________.

progressive tax system to fund transfer payments.

A price ceiling placed below the equilibrium price would result in excess __________ This is referred to as a __________

-demand -shortage

Consider a simple opportunity for​ trade: You are renting a new condo and the previous tenant offers to sell her old couch. You are the sole buyer and you have a willingness to pay of ​$220. The previous tenant is the sole seller and has a willingness to accept of ​$100. Assuming you and the previous tenant arrive at a mutually beneficial​ agreement, the social surplus will be ​$____. Suppose the condo association imposes a tax of ​$60 ​(i.e., a​ tax) for each item left in the condo during the​ move-in/move-out. Given the​ information, the social surplus after the imposition of the tax will _______________ _____________ Suppose the fee were raised to ​$140. In this​ case, the social surplus will ______ ______ ______ and the deadweight loss will be ​$_____.

-120 -remain unchanged. -fall to zero -120

Which of the following is an example of the opportunity cost of government​ bureaucracies?

-A tax collector who was qualified to produce motherboards

Why are there two different views on the effect of taxation on labor supply in the United​ States?

-All of the above.

In an​ economy, if the government implements a law for individuals that requires them to save at least​ 25% of their annual income in a social savings plan framed by the government. For supporting this​ plan, the government raises revenues by implementing income tax rates that are higher compared to the other countries. Which of the following will be a​ result(s) of this​ scenario? ​(Check all that apply.​) Which of the following arguments is not consistent with​ paternalism? Which of the following functions is beyond the scope of economics as far as government intervention is​ considered?

-An increase in costs to the government. -An increase in the deadweight losses. -Individuals make choices that reflect their true preferences and know what is best for them. -To make a value judgment on whether government is good or bad.

Which of the following statements explains the​ trade-off between equity and​ efficiency? With an upward movement along the​ equity-efficiency trade-off​ curve, the social surplus will __________. With a downward movement along the​ equity-efficiency trade-off​ curve, the inequality will __________.

-The​ equity-efficiency trade-off represents the balance between ensuring an equitable allocation of resources​ (equity) and increasing social surplus or total output​ (efficiency). -increase -decrease

A black market is​ ____________. What types of goods are likely to be traded in a black​ market? ​(Check all that apply​.) Which of the following is a problem that black markets pose in an​ economy?

-a nonlegal market for regulated goods and services. -drug dealing -prostitution -governments use resources to enforce the law

Which of the following is a cost associated with government intervention in an economic​ system? Given that there are costs involved with government intervention in an​ economy, governments still choose to intervene in markets to​ ____________.

-bureaucracies -reduce inequality

Direct regulation is​ ____________. Examples of direct regulation include​ ____________. ​(Check all that apply​.)

-direct actions by the government to control the amount of an activity. -laws restricting alcohol purchases -price ceilings -fishing quotas (zoning restrictions)?

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 price floor placed below the equilibrium price would ▼ the market. If the price floor was set above the equilibrium price it would ▼ create a surplus in have no effect on create a shortage in the market. A price floor reallocates surplus to ▼ consumers producers .

-have no effect on -create a surplus in -producers

The largest source of revenue for the federal government is​ ___________. The sources of revenue for state and local governments are _______ ______ those of the federal government. Which of the following is the largest source of revenue for state​ governments?

-individual income taxes. -different from -Miscellaneous taxes and​ fees, such as tolls on roads and public transportation tickets.

The largest source of revenue for the federal government is​ ___________. The sources of revenue for state and local governments are ___________ those of the federal government. Which of the following is the largest source of revenue for state​ governments? Which of the following is the largest source of revenue for state​ governments?

-individual income taxes. -different from -Miscellaneous taxes and​ fees, such as tolls on roads and public transportation tickets.

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.

The primary types of tax systems are​ ___________. An example of a progressive tax is the​ __________. An example of a regressive tax is the​ ___________. An example of a proportional tax is the​ ___________.

-proportional tax systems. -progressive tax systems. -regressive tax systems. -income tax -Social Security tax -Medicare tax

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

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

Tax incidence refers to​ ____________. Is the entire burden of the tax always borne by those on whom it is​ imposed?

-who bears the burden of a tax. -Not​ necessarily, since the burden of the tax depends on price elasticity.

Which of the following is not a factor that influences government taxation and spending​ decisions?

Correcting​ post-tax income distribution

_______ ________ ______ 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

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.

Many people have argued that an income tax should be​ "marriage neutral," that​ is, two people should pay the same total tax whether they are married or they are single. Suppose Amanda earns​ nothing, Ben earns​ $60,000, and Cathy and Dylan each earn​ $30,000. They are all single. Amanda pays no tax because she has no income. If they all live in a country that has a progressive income​ tax, which will be​ higher: the tax that Ben pays or the sum of the taxes Cathy and Dylan​ pay? Amanda marries Ben and Cathy marries Dylan. This country taxes married couples based on a​ family's total income. Amanda and Ben will pay the same tax as Cathy and Dylan because​ ____________. Is the income tax in this country marriage​ neutral?

The tax that Ben pays because​ high-income individuals pay higher income taxes. This is the correct answer. the couples have the same family income. ​No, because Cathy and Dylan pay higher taxes when married than before marriage.

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.

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

Britain taxed windows from 1696 until 1851. Under the 1747-1757 tax​ rates, you would pay no tax if your home had 0-9 ​windows, but if your home had 10-14 windows you would pay a tax of 6 pence per window for every window in your home. The window tax is similar to the U.S. income tax in that both are​ ___________. The window tax is different from the U.S. income tax in that as windows​ increase, ____________. Do you think from 1747-1757 the number of new homes with 9 or fewer windows increased from the​ pre-1747 days?

progressive taxes. Britain's window tax increases for all​ windows, and as income​ increases, the U.S. income tax rate increases on marginal income. Yes, because the marginal cost of having more windows increased.

​Lump-sum taxes are Is the deadweight loss of taxation the same for different types of​ taxes?

regressive No, it differs according to how taxes change incentives.