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 federalgovernment'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.
