The ___ was intended to apply only to the rich but will soon apply to the middle-class
unless Congress indexes it for ___.
A. ATM; inflation
B. AMT; inflation
C. ATM; recession
D. AMT; recession
Answer:
If the supply curve of X is flat (elastic) and the demand curve is steep (inelastic), then a
$2 tax on producers of X raises price ___ than $1 and most of the burden falls on ___.
A. more; producers
B. more; consumers
C. less; producers
D. less; consumers
Answer:
Looking across households in a given year, if the tax/income ratio rises as taxable
income rises, then the tax schedule is ___.
A. progressive
B. proportional
C. regressive
D. efficient
Answer:
The process by which local governments compete to attract residents is called _____.
A. the Tiebout process
B. the separation process
C. federalism
D. optimal federalism
Answer:
For each $1 that a local government spends above $1,000 on activity X, the state
government will give it $2 to spend on X. The purpose of the $1,000 threshold is
_____.
A. to save the state money without reducing the price incentive
B. to save the local government money without reducing the price incentive
C. to increase the price incentive
D. to increase the local government’s fiscal capacity
Answer:
For a family with two children, the first $100 of wage income results in an EITC of
___.
A. $10
B. $20
C. $30
D. $40
Answer:
With no policy, each firm emits 120 tons of carbon. As H reduces its emissions from
120 to 0, its marginal abatement cost (MAC) rises from $0 to $480; as L reduces its
emissions from 120 to 0, its MAC rises from $0 to $120. The MD of a ton of carbon is
$96. The tax per ton is T.
Refer to Figure 2.2. If the government gives 120 permits and firms buy and sell, the
price would end up _____.
A. $24
B. $48
C. $72
D. $96
Answer:
Which can be made progressive?
A. A household consumption tax but not a household income tax
B. A household income tax but not a household consumption tax
C. A household consumption tax or a household income tax
D. Neither a household consumption tax nor a household income tax
Answer:
If a city government levies a high wage income tax on commuters, then
A. firms may move to the suburbs but commuters won’t find suburban jobs.
B. commuters may find suburban jobs but firms won’t move to the suburbs.
C. firms won’t move to the suburbs and commuters won’t find suburban jobs.
D. firms may move to the suburbs and commuters may find suburban jobs.
Answer:
If the interest rate is 10%, the present value of $110,000 in year 1 is __.
A. $110,000
B. $100,000
C. $90,000
D. $80,000
Answer:
According to the benefit approach, a property tax in itself would shift ____ the ____
curve for homes but providing public schools shifts ____ the ____ curve.
A. down; supply; up; supply
B. down; demand; up; demand
C. up; supply; down; supply
D. up; demand; down; demand
Answer:
If there is a positive _____, health insurance may generate a quantity of medical care
that is ____.
A. benefit; socially optimal
B. benefit; privately optimal
C. externality; socially optimal
D. externality; privately optimal
Answer:
But if creditors decide not to lend to the children because they think they will default
like their parents, then children may judge that they _____ pay off their parents’ debt, so
their parents’ borrowing _____ burden them.
A. do not have to; does not
B. do not have to; does
C. do have to; does not
D. do have to; does
Answer:
The strategy of consumer-driven health care uses a tax incentive to encourage
households to choose _______.
A. catastrophic insurance
B. complete insurance
C. no insurance
D. no medical care
Answer:
A public-private school tuition ___ might be socially optimal if there is a _____ when a
parent decides to send her child to a neighborhood public school.
A. gap; positive externality
B. gap; negative externality
C. competition; positive externality
D. competition; negative externality
Answer:
Refer to Figure 3.1. At a wall thickness smaller than the social optimum, it would
____to divide the
cost among the three families so that each would ____ from making the wall a foot
thicker.
A. not be possible; lose
B. not be possible; gain
C. be possible; lose
D. be possible; gain
Answer:
Building a highway reduces commuter time and raises the price of suburban homes;
___ should be counted as a benefit.
A. definitely both
B. neither
C. just one
D. probably both
Answer:
In a competitive insurance market, an insurer who charges a premium that varies
directly with income will attract ____ to enroll.
A. everyone
B. only low-income people
C. only high-income people
D. no one
Answer:
A free market usually generates two kinds of efficiency:
A. productive and distributive.
B. distributive and allocative.
C. productive and allocative.
D. allocative and redistributive.
Answer:
Suppose a 40% tax on savers’ capital income raises the market interest rate from 8% to
10%. Then the savers’ after-tax return is reduced ___% by imposing the tax.
A. 40%
B. 60%
C. 25%
D. 75%
Answer:
State revenue comes mainly from the personal income tax and the ___ tax.
Answer:
Part A of Medicare for hospital care is funded by a payroll tax– ___ on the employer,
___ on the employee, ___.
Answer:
A tax of $___ would induce the firms to achieve what is best for society.
Answer:
Draw and explain a diagram that shows who bears the burden of employer-provided
health insurance.
Answer:
The initial cost estimate by Bush’s economic adviser (Lawrence Lindsey) of an
intervention in Iraq was ___ billion or ___ per person.
Answer:
Risk was ___ by moving to a ___ workers support retirees system.
Answer:
Why does a free market usually work well for consumers?
Answer: