Economics (McConnell), 18th Edition

Chapter 17: Public Choice Theory and the Economics of Taxation

Quiz

1
Suppose that product X is taxed at a constant rate of 10%. However, high-income individuals spend a greater proportion of their income on X than low-income individuals. The tax on product X is:
A)regressive
B)proportional
C)progressive
D)elastic
2
Sellers will bear the largest burden of an excise tax if:
A)both demand and supply are elastic
B)both demand and supply are inelastic
C)demand is elastic and supply is inelastic
D)demand is inelastic and supply is elastic
3
According to public choice theorists, which of the following circumstances will most likely lead to approval of a given public project?
A)Immediate costs and benefits
B)Delayed costs and benefits
C)Immediate benefits and delayed costs
D)Delayed benefits and immediate costs
4
As the election nears, the positions of the major presidential candidates tend to converge. This is an implication of:
A)the Coase Theorem
B)the median voter model
C)political logrolling
D)government failure
5
Which of the following federal taxes is most progressive?
A)Corporate income tax
B)Personal income tax
C)Social security tax
D)Medicare tax
6
The alleged inefficiency of public bureaucracies arises primarily because:
A)the voting paradox leads to too little public output
B)special interests work to assure the passage of projects whose costs exceed their benefits
C)public sector workers have less training than their private sector counterparts
D)competitive pressures of the market are largely absent
7
If someone earning $50,000 pays $10,000 in taxes and someone earning $80,000 pays $20,000 in taxes, then over this range the tax is:
A)proportional
B)progressive
C)regressive
D)retrograde
8
The demand for gasoline is more elastic in the long run than the short run. All else equal, this implies that over time, an excise tax on gasoline will:
A)increasingly be passed onto consumers
B)increasingly be passed back onto sellers
C)have a shrinking efficiency loss
D)generate increasing tax revenues
9
By law, the payroll tax is levied equally on workers and their employees, each paying 7.65%. In the aggregate, the supply of labor is essentially perfectly inelastic. Combining these two observations, we can conclude that the true burden of the tax:
A)is equally shared by employers and workers
B)falls mostly on employers
C)falls fully on employers
D)falls fully on workers
10
Suppose the only three members of society will receive marginal benefits from a proposed public project equal to $300, $500, and $800, respectively. However, each must pay taxes of $400 to pay for the total cost. In the absence of vote trading, a majority rule vote will:
A)pass this project and resources will be allocated efficiently
B)pass this project and resources will be overallocated to the project
C)defeat this project and resources will be allocated efficiently
D)defeat this project and resources will be underallocated to the project
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