Deck 22: Public Finance in a Federal System

Question 1

A local public good

A)only benefits members of a particular community.
B)gives higher benefits than regular public goods.
C)requires unanimous voting.
D)has become an integral part of the federal government.

Answer 1

only benefits members of a particular community.

Question 2

A Tiebout model involves

A)completely mobile individuals.
B)governments generating no externalities.
C)perfect information.
D)all of the above.

Answer 2

all of the above.

Question 3

The assessed value of a home is

A)the value that the jurisdiction uses to assign taxes.
B)an annual 6% increase in the value of a home.
C)the annual rate of deprecation of a home because of use.
D)always lower than its market value.

Answer 3

the value that the jurisdiction uses to assign taxes.

Question 4

__________ explores the roles of different level of government and the ways in which they relate to each other

A)Federal system
B)Club model
C)Centralization.
D)Fiscal federalism

Question 5

For the last 100 years,the level of government that has seen the largest increase in its percentage of expenditures is

A)local.
B)state.
C)federal.
D)all of the above.

Question 6

The ratio of tax collections to tax capacity is known as tax effort.

Question 7

_________ percent of Americans have different residences than they did the year before.

A)30
B)17
C)9
D)22

Question 8

When a tax is based on the difference between the market value of the taxpayer's assets and liabilities,it is called

A)a difference tax.
B)a wedge tax.
C)a personal net worth tax.
D)an implied liability tax.

Question 9

When did the percentage of federal grants in state and local expenditures reach its peak?

A)1960s
B)1970s
C)1980s
D)1990s

Question 10

A local government would not be efficient in providing which of the following services?

A)international aid
B)police protection
C)fire protection
D)roads

Question 11

Local property taxes are used to provide

A)education.
B)fire protection.
C)libraries.
D)all of the above.

Question 12

Which of the following is not a political jurisdiction?

A)Cook County
B)Alabama
C)New York City
D)California research triangle

Question 13

Disadvantages of decentralization are

A)intercommunity externalities.
B)forgone scale economies in the provision of public goods.
C)inefficient taxation.
D)the lack of ability to redistribute income.
E)all of the above.

Question 14

When the federal government gives a grant to a state or local government without restrictions on use,this is known as

A)revenue sharing.
B)block grants.
C)endowments.
D)tax shelter.

Question 15

A circuit breaker is concerned with

A)faulty tax wiring.
B)residential property taxes.
C)corporate tax systems.
D)block grants.

Question 16

It is easier to avoid state and local taxes than federal taxes.

Question 17

The property tax is very popular because

A)it is fairly assigned.
B)it is administered locally.
C)it is very regressive.
D)of all of the above.
E)of none of the above.

Question 18

What does foundation aid do?

A)increases shareholders' net worth
B)ensures minimum level of expenditures
C)ensures a maximum level of expenditures
D)reduces tax liability for the poor

Question 19

The Tiebout model assumes that public services are financed by a proportional property tax.

Question 20

When a group of people voluntarily band together to share some kind of benefit,we call this a

A)a gang.
B)a team.
C)a coalition.
D)a club.

Question 21

The flypaper effect causes money to move from where it initially hits and sticks somewhere down the bureaucratic chain.

Question 22

Grants as a percent of total federal outlays have been increasing since the 1960s.

Question 23

Property taxes are not very popular.People might dislike other taxes just as much,but feel powerless to change them.If the assessed value of the property does not rise or,in fact,declines,then this should be followed by decreases in tax rates.This,however,is not welcomed by property owners,either.Why?

Question 24

Refer to Figure 22.2 in your textbook.Suppose that the supply of land is constant at L acres,and Price per acre is $400.In addition,the before-tax demand for land can be characterized by the equation P = 500 - 2L,where L is the acres of land and P is the price.
(A)What is the constant supply of land (L)in the market?
(B)If the after-tax demand curve,
,can be written as P = 400 - 4L,what is
,and how much tax revenue is generated?

Question 25

Some cities have a relatively high residential property tax,while others have a low residential property tax.Give an explanation for this.

Question 26

Refer to Figure 22.3 in your textbook.Suppose that the supply curve is constant at $10.Suppose further that the before?tax demand curve D_B can be written as B = 20 - P/2,where B is the number of structures per year and P is the price.
(A)Find B₀.
(B)Suppose that the after-tax demand curve,
,can be written as B = 20 - P.Find B₁ and

Question 27

Suppose that the demand for housing is given by the equation X_d=8-P/3.If the price of housing is initially 9,what is the amount of consumer surplus? Suppose now that the price changes to 13.What happens to consumer surplus? Is there a DWL?

Question 28

Local property tax policy generally has a small effect on the property tax base.

Question 29

Lump sum grants are sometimes referred to as categorical grants.

Question 30

The proportion of total direct expenditure made by local governments is called the centralization ratio.

Question 31

In Tiebout Model,the tax can vary across communities.

Question 32

Refer to Figure 22.5 in your textbook.Suppose that the initial budget constraint AB is given by the equation G = 150 - c/5,where G is the units of public good and c is consumption.A closed-ended matching grant up to 100 units of public good is proposed.If the slope of line segment AD is - 2,write the equation of the new budget constraint after a closed-ended matching grant.

Question 33

The town of Little Bohemia has an estimated elasticity of demand for land of 2.What effect would there be to the quantity demanded from a 10% decrease in the price of land due to a tax increase?

Question 34

A federal system consists of one level of government to provide public goods and services.

Question 35

The Tiebout model can be summarized as "voting with the invisible hand."

Question 36

The Tiebout model offers a quasi-market solution to public good production and community development.What are some drawbacks to this model?