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intermediate microeconomics

Study Guide For N. Gregory Mankiw's Principles Of Microeconomics 5th Edition David R. Hakes - Solutions

2. Is this type of tax supported by the "benefits principle" of tax equity? Explain.
1. What type of tax is your friend suggesting? What is its appeal?
20. The appropriate tax rate to employ to gauge how much the tax system distorts incentives and decision making is thea. marginal tax rate.b. average tax rate. C. proportional tax rate.d. horizontal tax rate. C. vertical tax rate.
19. Which of the following taxes can be supported by the benefits principle of taxation? gasoline taxes used to pay for roadsa. b. progressive income taxes used to pay for national defensec. property taxes used to pay for police and the court systemd. progressive income taxes used to pay for
18. The ability-to-pay principle of taxation suggests that if a tax system is to be vertically equitable, it should bea. regressive.b. proportional.c. progressive.d. efficient.e. lump-sum.
17. The marginal tax rate for a taxpayer whose earnings rise from $30,000 to $40,000 isa. 0 percent.b. 16.7 percent.c. 37.5 percent.d. 100 percent.e. none of the above.
16. This tax system is 2. progressive.b. lump-sum. C. regressive.d. proportional.
15. The average tax rate for a taxpayer earning $20,000 isa. 0 percent.b. 5 percent.c. 10 percent.d. 20 percent.e. none of the above.
14. A progressive tax system is one wherea. marginal tax rates are low.b. marginal tax rates are high.c. higher income taxpayers pay more taxes than do lower income taxpayers.d. higher income taxpayers pay a greater percentage of their income in taxes than do lower income taxpayers. Use the
13. Which of the following taxes is the most efficient tax?a. a proportional income taxb. a progressive income tax C. a consumption taxd. a lump-sum tax
12. The average tax rate isa. total taxes paid divided by total income.b. the taxes paid by the marginal worker.c. the extra taxes paid on an additional dollar of income.d. total income divided by total taxes paid.
11. The appropriate tax rate to employ to judge the vertical equity of a tax system is thea. marginal tax rate.b. average tax rate.c. proportional tax rate.d. horizontal tax rate.
10. The marginal tax rate isa. total taxes paid divided by total income.b. the taxes paid by the marginal worker.c. the extra taxes paid on an additional dollar of income.d. total income divided by total taxes paid.
9. An efficient taxa. raises revenue at the smallest possible cost to taxpayers.b. minimizes the deadweight loss from the tax.c. minimizes the administrative burden from the tax.d. does all of the above.
8. A tax for which high-income taxpayers pay a smaller fraction of their income than do low-income taxpayers is known as a(n)a. proportional tax.b. progressive tax.c. regressive tax.d. equitable tax.
7. Susan values a pair of blue jeans at $40. If the price is $35, Susan buys the jeans and generates consumer surplus of $5. Suppose a tax is placed on blue jeans that causes the price of blue jeans to rise to $45. Now Susan fails to buy a pair of jeans. This example has demonstrateda. the
6. If the federal government runs a budget surplus, there is a(n)a. excess of government spending over government receipts.b. excess of government receipts over government spending.c. equality of government spending and receipts.d. surplus of government workers.
5. Which one of the following statements regarding the taxes and spending of state and local governments is true?a. State and local governments collect more tax revenue than the federal government.b. The greatest expenditure of state and local governments is on education.c. Corporate income taxes
4. Which of the following lists the spending by the federal government from the largest category to the smallest category?a. Social Security, national defense, Medicare, income security, health, net interestb. national defense, net interest, Social Security, income security, health, Medicarec. d.e.
3. In 2007, the average American paid federal taxes of abouta. $4,500.b. $5,500.c. $6,500.d. $7,500.e. $8,500.
2. In the United States, the tax system isa. progressive.b. regressive.c. proportional.d. lump sum.
1. Which of the following lists the sources of tax revenue to the federal government from the largest source to the smallest source?a. individual income taxes, corporate income taxes, social insurance taxesc. b. corporate income taxes, individual income taxes, social insurance taxes individual
10. In the United States, what is the income tax rate for the lowest income quintile?What is the income tax rate for the highest income quintile? Are income taxes in the United States progressive?
9. Are corporate income taxes truly paid by the corporation? That is, is the burden of the tax on the corporation? Explain.
8. Explain the difference between the benefits principle and the ability-to-pay principle of taxation. Which principle of taxation stresses vertical equity? Explain.
7. Is a lump-sum tax efficient? Explain. Why do we rarely see lump-sum taxes in the real world?
6. Is a consumption tax efficient? Explain.
5. What does it mean to say that a tax is efficient? What makes a tax efficient?
4. List the categories of spending by state and local governments from the largest to the smallest.
. List the sources of revenue for state and local governments from the largest source to the smallest.
2. List the categories of spending by the federal government from the largest to the smallest.
1. List the sources of revenue for the federal government from the largest source to the smallest.
5.a. Suppose the only objective of the tax system is to collect $6,000 from people who make $30,000. Which of the tax systems described in questions 1 through 4 is best? Why?b. Suppose the only objective of the tax system is to be efficient. Which of the tax systems described in questions 1 through
4.a. Fill out the table below assuming that the government taxes 40 percent of the first $10,000 of income and 10 percent of all income above $10,000. Average Tax Rate Marginal Tax Rate Income Taxes Paid $10,000 20,000 30,000 40,000 50,000b. Compare the taxes for someone making $10,000 to those of
3.a. Fill out the table below assuming that the government imposes a lump-sum tax of $6,000 on all individuals. $10,000 20,000 30,000 40,000b. a. Compare the taxes for someone making $10,000 to those ofsomeone making $50,000 in part a above. Is this tax system progressive, regressive, or
2.a. Fill out the table below assuming that the government imposes a lump-sum tax of $6,000 on all individuals. $10,000 20,000 30,000 40,000b. a. Compare the taxes for someone making $10,000 to those ofsomeone making $50,000 in part a above. Is this tax system progressive, regressive, or
1.a. . ' , . Fill out the table below assuming that the government taxes 20 percent ofthe first $30,000 ofincome and 50 percent ofall income above $30,000 . ,,,,' 'Sd~~' '" $10,000 20,000 30,000 40,000 ~ ~ , -:". ", 'I'I"~ fi!a:ii:l," _"' '" )" ',lA:~Jra,I~ sr.,. ,'~.sinal :ra~ : " .' .,' t ~ ,
Discuss the efficiency and equiry ofa flat tax
Explain why the burden of a tax often lands on someone other than the person from whom the tax is collected
Compare the benefits principle to the ability-to-pay principle of allocating a tax burden
Describe the administrative burdens of a tax
List the four largest sources of tax revenue to the U.S. government from the largest to the smallest source
5. What type of good (private, public, common resource, produced by a natural monopoly) is this newer type of television and music provision?
4. What are the "recent" alternatives to traditional commercial television and commercial radio?
3. Private companies have been providing broadcast television and radio since the invention of the medium. How do they make it profitable if they cannot charge the recipient of the signal?
2. Is this type of good normally provided by private industry? Why or why not?
1. What type of good (private, public, common resource, produced by a natural monopoly) is a broadcast television or broadcast radio signal? Explain.
20. A person who regularly watches public television but fails to contribute to public television's fund-raising drives is known asa. a common resource.b. a costly rider.c. a free rider.d. an unwelcome rider.e. excess baggage.
19. A congested toll road isa. a private good.b. a public good. C. a common resource.d. a good produced by a natural monopoly.
18. If a person can be prevented from using a good, the good is said to be 3. a common resource.b. a public good.c. rival in consumption.d. excludable.
17. When markets fail to allocate resources efficiently, the ultimate source of the problem is usuallya. that prices are not high enough so people overconsume.b. that prices are not low enough so firms overproduce.c. that property rights have not been well established.d. government regulation.
16. Which of the following are potential solutions to the problem of air pollution?a. auction off pollution permitsb. grant rights of the clean air to citizens so that firms must purchase the right to pollutec. regulate the amount of pollutants that firms can put in the aird. all of the above
15. The Tragedy of the Commons is a parable that illustrates whya. public goods are underproduced.b. private goods are underconsumed.c. common resources are overconsumed.d. natural monopolies overproduce goods.
14. Which of the following is an example of a common resource?a. a national parkb. a fireworks displayc. national defensed. iron ore
13. When governments employ cost-benefit analysis to help them decide whether to provide a public good, measuring benefits is difficult becausea. one can never place a value on human life or the environment.b. respondents to questionnaires have little incentive to tell the truth.c. there are no
12. A negative externality affects market efficiency in a manner similar toa. a private good.b. c. a public good. a common resource..d. an excludable good.
11. Suppose that requiring motorcycle riders to wear helmets reduces the probability of a motorcycle fatality from 0.3 percent to 0.2 percent over the lifetime of a motorcycle rider and that the cost of a lifetime supply of helmets is $500. It is efficient for the government to require riders to
10. A positive externality affects market efficiency in a manner similar to aa. private good.b. public good. C. common resource.d. rival good.
9. Which of the following is an example of a public good?a. b. whales in the ocean apples on a tree in a public parkc. hot dogs at a picnicd. national defense
8. A free rider is a person whoa. receives the benefit of a good but avoids paying for it.b. produces a good but fails to receive payment for the good.c. pays for a good but fails to receive any benefit from the good.d. fails to produce goods but is allowed to consume goods.
7. Suppose each of 20 neighbors on a street values street repairs at $3,000. The cost of the street repair is $40,000. Which of the following statements is true?a. It is not efficient to have the street repaired.b. It is efficient for each neighbor to pay $3,000 to repair the section of street in
6. Public goods are difficult for a private market to provide due toa. the public goods problem.b. the rivalness problem.c. the Tragedy of the Commons.d. the free-rider problem.
5. A common resource isa. both rival in consumption and excludable.b. neither rival in consumption nor excludable. rival in consumption but not excludable. C.d. not rival in consumption but excludable.
4. A good produced by a natural monopoly isa. both rival in consumption and excludable.b. neither rival in consumption nor excludable. rival in consumption but not excludable.d. not rival in consumption but excludable. c.
3. A private good isa. both rival in consumption and excludable.b. neither rival in consumption nor excludable. rival in consumption but not excludable.c. d. not rival in consumption but excludable.
2. A public good isa. both rival in consumption and excludable.b. neither rival in consumption nor excludable. rival in consumption but not excludable.c. d. not rival in consumption but excludable.
1. If one person's consumption of a good diminishes other people's use of the good, the good is said to bea. a common resource.b. C. a good produced by a natural monopoly. rival in consumption.d. excludable.
10. Were the buffalo hunters that almost made the buffalo extinct behaving irrationally? Explain.
Why did buffalo almost become extinct while cows (a similar animal) are unlikely to ever become extinct?
Food is more important than roads to the public, yet the government provides roads for the public and rarely provides food. Why'
How can the establishment of individual property rights eliminate the problems associated with a common resource?
How are fish in the ocean (a common resource) related to a ll
What type of problem are hunting and fIshing licenses intended to relieve? EXl'lain.
Suppose the value of a human life is $10 million. Suppose the use of in cars reduces the probability of dying in a car accident over one's lifetime from 0.2 percent to 0.1 percent. Further, suppose that a lifetime supply will cost the average consumer $12,000. Ifthese numbers were accurate, would
How is a streetlight (a public good) related to a positive externality?
2. Why is it difficult for private industry to provide public goods?
1. What does it mean to say that a good is excludable?
2. A hot dog served at a private party A hot dog sold at a stand owned by the city government -------------------------_......_- Suppose the city ofRoadville is debating whether to build a new highway from its airport to the downtown area. The city surveys its citizens and fmds that, on average,
Explain the public good nature ofnational defense Explain why surveys to determine the benefits ofpublic goods are a less precise valuation ofbenefits than prices of private goods Tell the story ofthe Tragedy of the Commons Explain why fish and wildlife are common resources
Explain why production of public goods is unprofitable to private industry
ClassifY goods into the categories ofpublic goods, private go?ds;common resources, or goods produced by a natural monopoly
Although taxes and subsidies usually create inefficiencies, are taxes and subsidies always inefficient? Why or why not?
What is the externality that this subsidy is trying to internalize?
What is the city government trying to subsidize with this tax break?
20. Suppose an industry emits a negative externality such as pollution, and the possible methods to internalize the externality are command-and-control policies, corrective taxes, and tradable pollution permits. If economists were to rank these methods for internalizing a negative externality based
19. When wealthy alumni provide charitable contributions to their alma mater to reduce the tuition payments of current students, it is an example of 3. an attempt to internalize a positive externality.b. c.d. an attempt to internalize a negative externality. a corrective tax. a command-and-control
18. Tradable pollution permitsa. set the price of pollution.b. set the quantity of pollution.c. determine the demand for pollution rights.d. reduce the incentive for technological innovations to further reduce pollution.
17. A corrective tax on pollutiona. sets the price of pollution.b. sets the quantity of pollution.c. determines the demand for pollution rights.d. reduces the incentive for technological innovations to further reduce pollution.
16. The gas-guzzler tax that is placed on new vehicles that get very poor mileage is an example ofa. a tradable pollution permit.b. an application of the Coase theorem.c. d. an attempt to internalize a positive externality. an attempt to internalize a negative externality.
15. Which of the following is true regarding tradable pollution permits and corrective taxes?a. Corrective taxes are more likely to reduce pollution to a targeted amount than tradable pollution permits.b. Tradable pollution permits efficiently reduce pollution only if they are initially distributed
14. Bob and Tom live in a university dorm. Bob values playing loud music at a value of $100. Tom values peace and quiet at a value of $150. Which of the following statements is true about an efficient solution to this externality problem if Bob has the right to play loud music and if there are no
13. Bob and Tom live in a university dorm. Bob values playing loud music at a value of $100. Tom values peace and quiet at a value of $150. Which of the following statements is true?a. It is efficient for Bob to continue to play loud music.b. It is efficient for Bob to stop playing loud music only
12. Which of the following is not considered a transaction cost incurred by parties in the process of contracting to eliminate a pollution externality? 3. costs incurred to reduce the pollutionb. costs incurred due to lawyers' feesc. costs incurred to enforce the agreementd. e. costs incurred due
11. To internalize a positive externality, an appropriate public policy response would be to 3. ban the good creating the externality.b. have the government produce the good until the value of an additional unit is zero.c. subsidize the good.d. tax the good.
10. According to the Coase theorem, private parties can solve the problem of externalities ifa. each affected party has equal power in the negotiations.b. the party affected by the externality has the initial property right to be left alone.c. there are no transaction costs.d. the government
9. The most efficient pollution control system would ensure thata. each polluter reduce its pollution an equal amount.b. the polluters with the lowest cost of reducing pollution reduce their pollution the greatest amount.c. no pollution of the environment is tolerated.d. the regulators decide how
8. When an individual buys a car in a congested urban area, it generatesa. an efficient market outcome.b. a technology spillover. a positive externality. a negative externality. C. d.
7. The government engages in an industrial policya. b.c. to internalize the negative externality associated with industrial pollution. to internalize the positive externality associated with technology-enhancing industries. to help stimulate private solutions to the technology externality.d. by
6. To internalize a negative externality, an appropriate public policy response would be toa. ban the production of all goods creating negative externalities.b. have the government take over the production of the good causing the externality.c. subsidize the good.d. tax the good.
5. A positive externality (that has not been internalized) causes thea. optimal quantity to exceed the equilibrium quantity.b. equilibrium quantity to exceed the optimal quantity.c. equilibrium quantity to equal the optimal quantity.d. equilibrium quantity to be either above or below the optimal

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