Question 1

Public education is an in-kind benefit.

Accepted Answer

Public education is provided by the government as a non-transferable benefit, meaning that it cannot be bought or sold, and is considered an in-kind benefit.

Question 2

The effective tax rate refers to the actual taxes paid as a percentage of taxable income.

Accepted Answer

The answer of The effective tax rate refers to the...

Question 3

The nominal tax rate refers to the actual taxes paid as a percentage of taxable income.

Accepted Answer

The answer of The nominal tax rate refers to the...

Question 4

Loopholes, exemptions, and deductions cause an erosion of the tax base.

Accepted Answer

Loopholes, exemptions, and deductions allow individuals or businesses to reduce the amount of income that is subject to taxation, which ultimately reduces the overall tax revenue collected by the government. This leads to an erosion of the tax base and can create inequities in the tax system.

Question 5

The flat tax was originally proposed by

Accepted Answer

Milton Friedman, a Nobel Prize-winning economist, first proposed the idea of a flat tax in his book "Capitalism and Freedom" in 1962. The flat tax proposal gained popularity among conservative politicians, including Ronald Reagan, but it was not implemented at the federal level in the United States.

Question 6

The principle of horizontal equity is violated if two people who earn the same amount of income actually pay a different amount in taxes.

Accepted Answer

Horizontal equity means that individuals who are in similar financial situations should be treated equally by the tax system. If two people with the same income pay different amounts in taxes, then horizontal equity is violated.

Question 7

The greater the area between the Lorenz curve and the diagonal line of absolute equality, the more inequality exists.

Accepted Answer

The Lorenz curve represents the distribution of a certain variable across a population, and the diagonal line of absolute equality represents a perfectly equal distribution. Therefore, the greater the area between the two curves, the more unequal the distribution is.

Question 8

In the article "Obama Pitches Tax Hike on the Rich" all of the following are true except

Accepted Answer

The Republican Party did not propose a lower tax increase on the top income groups. They proposed lower tax rates, which is different from a tax increase.

Question 9

A sales tax is a proportional tax.

Accepted Answer

A sales tax is considered a regressive tax because it takes a larger percentage of income from low-income earners than from high-income earners.

Question 10

Refer to the labor market in Figure 33.5.Suppose that the government imposes a payroll tax on employers in this market.How much of the tax burden will the employers actually pay?

Accepted Answer

The answer of  Refer to the labor market in...

Question 11

A person can have a great deal of wealth but have very little income.

Accepted Answer

Wealth refers to the assets and possessions a person owns or controls, such as property, investments, and savings. These assets can generate income through interest, dividends, or capital gains, but a person may not have a significant income from employment or other sources. Therefore, it is possible for someone to have a high net worth or wealth but a low income.

Question 12

A cartoon in the text says that while the economy has been expanding, the share of income to blacks and poor whites has decreased.This implies that the

Accepted Answer

The cartoon implies that the income distribution has become more unequal, which would result in an increase in the area between the Lorenz curve and the absolute equality line. Therefore, choice A is the best answer. Choices B, C, and D are incorrect because they suggest that income inequality has decreased, which is not supported by the information presented in the cartoon.

Question 13

One World View article is titled "Top Tax Rates." The highest marginal tax rates in the world in 2013 were found in

Accepted Answer

The answer of One World View article is titled "Top...

Question 14

One World View article is titled "Top Tax Rates." The lowest marginal tax rates in the world in 2013 were in

Accepted Answer

According to the article, the title is "Top Tax Rates," implying that the information being presented is about the highest-taxing countries. Therefore, the correct answer would be the country with the highest marginal tax rate, which is Monaco.

Question 15

Refer to the labor market in Figure 33.5.Suppose that the government imposes a payroll tax on employers in this market.How much will the government collect in tax receipts for every worker hired?

Accepted Answer

The payroll tax will increase the cost of hiring a worker by the amount of the tax. In this case, the tax is $1 per hour worked, which means that employers will now have to pay $8 per hour instead of $7 per hour. As a result, the equilibrium wage will increase from $7 to $8 per hour. However, workers will not be willing to supply as much labor at this higher wage, so the quantity of labor supplied will decrease from Q1 to Q2. The quantity of labor demanded by employers will also decrease from Q1 to Q3. The difference between the new wage ( $8 ) and the original wage ($7) is $1 per hour, which is the amount of the payroll tax. So, for every hour of work that is hired, the government will collect $3 in tax receipts ($1 from the employer and $2 from the worker). Therefore, the correct answer is B.

Question 16

The values of the Gini coefficient range from zero to +1.

Accepted Answer

The Gini coefficient ranges from 0 to 1, where a value of 0 represents perfect equality (everyone has the same income) and a value of 1 represents perfect inequality (one person has all the income).

Question 17

The benefits of a flat tax include all of the following except

Accepted Answer

The elimination of exemptions for children may be seen as a potential drawback of a flat tax system, as families with dependent children would no longer receive any tax breaks or deductions for their dependents.

Question 18

In making comparisons of personal income among countries, care must be exercised because in poor countries much of what is produced does not pass through markets and thus does not get counted in the nation's income.

Accepted Answer

This statement is true. In developing countries, a significant portion of economic activity may occur in the informal sector or through non-market transactions, which are not reflected in official income statistics. This can lead to underestimation of personal income and overall economic performance.

Question 19

One World View article is titled "U2 Avoids Taxes, Raising Ire in Ireland." The band U2 moved its corporate headquarters to Amsterdam because the Irish government

Accepted Answer

The Irish government capped tax-free royalty income at $360,000, which motivated U2 to move its corporate headquarters to Amsterdam to take advantage of more favorable tax laws regarding royalty income.

Question 20

Refer to the labor market in Figure 33.5.Suppose the government imposes a payroll tax on employers.How much of the tax burden is passed on to workers?

Accepted Answer