Chapter #10 Homework

The government runs a budget surplus when​ ____________. A. tax revenue exceeds its spending. B. tax revenue falls below its spending. C. the budget is balanced. D. investment exceeds its spending.

A. tax revenue exceeds its spending.

An example of a proportional tax is the​ ___________. A. property tax. B. income tax. C. Social Security tax. D. Medicare tax.

D. Medicare tax.

The sources of revenue for state and local governments are (THE SAME FROM / DIFFERENT FROM) those of the federal government.

DIFFERENT FROM

There is (SOMETIMES / NEVER / ALWAYS) a​ trade-off between equality and social surplus.

SOMETIMES

What types of goods are likely to be traded in a black​ market? ​(Check all that apply​.) A. Prostitution. B. Education. C. Drug dealing. D. Health care. E. Protective services.

A. Prostitution. C. Drug dealing.

The primary types of tax systems are​ ___________. ​(Check all that apply​.) A. proportional tax systems. B. average tax systems. C. regressive tax systems. D. marginal tax systems. E. progressive tax systems.

A. proportional tax systems. C. regressive tax systems. E. progressive tax systems.

If government tax revenues are $6.36.3 trillion and government spending is $6.76.7 trillion, the government is running a (BUDGET DEFICIT / BUDGET SURPLUS).

BUDGET DEFICIT

The largest source of revenue for the federal government is​ ___________. A. excise taxes excise taxes. B. property taxes property taxes. C. individual income taxes. D. corporate income taxes.

C. individual income taxes.

In competitive​ markets, tax​ incidence, as well as the​ equilibrium, is independent of whether the tax is imposed on consumers or sellers​ because: A. if it is imposed on the​ seller, the seller will lower the price and pass it to the consumer. B. if it is imposed on the​ consumer, the consumer will raise the price to pay the tax. C. if it is imposed on the​ consumer, the consumer will lower the price to pay the tax. D. if it is imposed on the​ seller, the seller will raise the price and pass it to the consumer.

D. if it is imposed on the​ seller, the seller will raise the price and pass it to the consumer.

Is the entire burden of the tax always borne by those on whom it is​ imposed? A. ​No, the burden of the tax is always passed along to others. B. Not​ necessarily, since the burden of the tax falls on consumers. C. Not​ necessarily, since the burden of the tax depends on price elasticity. D. ​Yes, since taxes are paid by consumers.

C. Not​ necessarily, since the burden of the tax depends on price elasticity.

Direct regulation is​ ____________. A. using the tax system to influence behavior. B. the government determining the incidence of a tax. C. direct actions by the government to control the amount of an activity. D. consumer sovereignty in a competitive market.

C. direct actions by the government to control the amount of an activity.

An example of a progressive tax is the​ __________. A. property tax. B. Social Security tax. C. income tax. D. sales tax.

C. income tax.

When tax rates​ increase, the deadweight loss of taxation increases by (A GREATER AMOUNT / LESS AMOUNT). This implies​ that, all else being​ equal, it is better to have many small tax sources (MANY SMALL TAX SOURCES / A FEW LARGE TAX SOURCES) Rather than (ONE LARGE TAX SOURCE / MANY SMALL TAX SOURCES).

- A GREATER AMOUNT - MANY SMALL TAX SOURCE - ONE LARGE TAX SOURCE

A price floor placed below the equilibrium price would (HAVE NO EFFECT ON / WOULD HAVE AN EFFECT ON) the market. If the price floor was set above the equilibrium price it would (CREATE A SURPLUS / WOULD CREATE A DEFICIT) the market. A price floor reallocates surplus to (CONSUMER / PRODUCER)

- HAVE NO EFFECT ON - CREATE A SURPLUS - PRODUCER

Given that there are costs involved with government intervention in an​ economy, governments still choose to intervene in markets to​ ____________. A. reduce poverty B. implement taxation. C. increase bureaucracy. D. generate black markets. E. decrease debt.

A. reduce poverty

Tax incidence refers to​ ____________. A. who bears the burden of a taX B. how much revenue a tax generates. C. the marginalmarginal tax rate. D. the extent to which a tax is proportional.

A. who bears the burden of a tax.

Is the deadweight loss of taxation the same for different types of​ taxes? A. ​Yes, because all taxes distort behavior. B. ​No, it differs according to whether consumers or producers pay the tax. C. ​No, it differs according to how taxes change incentives. D. ​Yes, because the tax incidence is the same for all taxes.

C. ​No, it differs according to how taxes change incentives.

Which of the following is a cost associated with government intervention in an economic​ system? A. Inequality. B. Unemployment C. Externalities. D. Bureaucracies

D. Bureaucracies

​Lump-sum taxes are (PROGRESSIVE, REGRESSIVE, PROPORTIONAL OR MARGINAL).

REGRESSIVE

Which of the following is an example of the opportunity cost of government​ bureaucracies? A. A tax collector who was qualified to produce motherboards B. A former OSHA representative who works for a chemical company C. An​ ex-math teacher who writes textbooks D. A retired computer engineer who volunteers to mentor teenagers

A. A tax collector who was qualified to produce motherboards

Which of the following is not a factor that influences government taxation and spending​ decisions? A. Correcting​ post-tax income distribution B. Correcting market failures and externalities C. Raising revenues D. Redistributing funds via transfer payments

A. Correcting​ post-tax income distribution

Consumer sovereignty suggests that​ ____________. A. consumers should be more open to government nudges. B. government should not interfere with consumer choices. C. consumers make better choices than government. D. government should always interfere with consumer choices.

B. government should not interfere with consumer choices.

An example of a regressive tax is the​ ___________. A. inheritance tax. B. Social Security tax Social Security tax. C. income tax. D. Medicare tax.

B. Social Security tax Social Security tax.

Which of the following is the largest source of revenue for state​ governments? A. Miscellaneous taxes and​ fees, such as tolls on roads and public transportation tickets. B. Individual​ (federal) income tax. C. Property tax. D. Sales tax.

A. Miscellaneous taxes and​ fees, such as tolls on roads and public transportation tickets.

A black market is​ ____________. A. a nonlegal market for regulated goods and services. B. an illegal market with negative externalities. C. a legal market without consumer sovereignty. D. a regulated market with excessive profits.

A. a nonlegal market for regulated goods and services.

Examples of direct regulation include​ ____________. ​(Check all that apply​.) A. fishing quotas. B. price floors. C. taxes. D. antismoking laws. E. subsidies.

A. fishing quotas. B. price floors. D. antismoking laws.

Paternalism is the view that​ ___________. A. people do not always know what is best for​ them, and government should encourage them to make the right choices. B. consumer choices represent​ people's preferences, and the government should not interfere with these choices. C. government intervention is always necessary to prevent people from making mistakes or bad choices. D. people are entitled to make bad decisions because government will​ "nudge" them to make good decisions.

A. people do not always know what is best for​ them, and government should encourage them to make the right 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 the government has been consistently running a budget​ deficit? A. ​Yes, government deficits are a direct result of government spending over time. B. ​No, government deficits depend upon spending and tax revenue. C. ​Yes, as government investment spending has​ increased, deficits have become inevitable. D. ​No, government deficits also depend on the national debt.

B. ​No, government deficits depend upon spending and tax revenue.

Economists toward the paternalistic end of the spectrum would probably say that some mistakes result from the fact​ that: A. individuals are not intelligent enough to make certain decisions. B. the​ government's business is not to influence people into making choices they can make on their own. C. individuals are not used to making decisions of a certain type. D. relinquishing the decision to the government decreases dead weight costs.

C. individuals are not used to making decisions of a certain type.

To reduce inequality and poverty in an​ economy, the government uses a​ ___________. A. regressive tax system to redistribute income from the rich to the poor. B. marginal tax system to generate wealth. C. proportional tax system to increase equity. D. progressive tax system to fund transfer payments.

D. progressive tax system to fund transfer payments.

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: A. verification is an easy task within a market economy. B. quantity regulations are so efficient. C. quantity regulations are so rare within a market economy. D. verification by each consumer would be extremely inefficient.

D. verification by each consumer would be extremely inefficient.

Which of the following is a problem that black markets pose in an​ economy? A. less variety of goods for consumers. B. the government being forced to levy lower taxes. C. the direct costs of obeying the government regulations. D. legitimate businesses extracting surplus. E. Participants use resources to evade the law

E. Participants use resources to evade the law