McGraw-Hill Ryerson

Chapter 20. Public Choice Theory and Taxation


1. Deficiencies in the processes used to make collective decisions in the public sector and economic inefficiencies caused by government are the primary focus of
A.public finance
B.public choice theory
C.the study of tax incidence
D.the study of tax shifting


2. The trading of votes to secure favourable outcomes on decisions which otherwise would be adverse is referred to as
A.logrolling, and it increases economic efficiency
B.logrolling, and it may increase or decrease economic efficiency
C.rent-seeking behavior, and it decreases economic efficiency
D.rent-seeking behavior, and it may increase or decrease economic efficiency


3.
R-1 31a

Answer on the basis of the following table, which shows the rankings of the public goods by three voters
In a choice between a dam and the school,
A.a majority of voters favor the dam
B.a majority of voters favor the school
C.a majority of voters favor both the dam and the school
D.there is no majority of votes for either the dam or the school



4.
R-1 31a

Answer on the basis of the following table, which shows the rankings of the public goods by three voters
In a choice between a road and a dam,
A.a majority of voters favor the dam
B.a majority of voters favor the road
C.a majority of voters favor both the dam and the road
D.there is no majority of votes for either the road or the dam



5.
R-1 31a

Answer on the basis of the following table, which shows the rankings of the public goods by three voters
In a choice between a school and a road,
A.a majority of voters favor the road
B.a majority of voters favor the school
C.a majority of voters favor both the road and the school
D.there is no majority of votes for either the road or the school



6.
R-1 31a

Answer on the basis of the following table, which shows the rankings of the public goods by three voters
What do the rankings in the table indicate about choices made under majority rule? Majority voting
A.reflects irrational preferences
B.produces inconsistent choices
C.produces consistent choices in spite of irrational preferences
D.results in economically efficient outcomes because they have been influenced by special interests



7. The idea that the person holding the middle position will in a sense determine the outcome of an election is suggested by the
A.rent-seeking behavior
B.paradox of voting
C.median-voter model
D.fallacy of limited decisions


8. Actions that groups take to seek government legislation which puts tariffs on foreign products to limit foreign competition or which gives tax breaks to specific corporations would best be an example of
A.how the median-voter model works
B.how political choices are bundled
C.rent-seeking behavior
D.the paradox of voting


9. It is difficult to determine whether provision for a particular good or service should be assigned to the private or public sector of the economy because the
A.institutions in both sectors function efficiently
B.markets function efficiently and the agencies of government perform imperfectly
C.markets are faulty and government agencies function with much greater efficiency
D.institutions in both sectors are imperfect


10. Which is true of the ability-to-pay principle as applied in Canada?
A.It is less widely applied than the benefits-received principle.
B.Tax incidence is generally taken as the measure of the ability to pay.
C.Gasoline taxes are based on this principle.
D.As an individual's income increases, taxes paid increase both absolutely and relatively.


11. Taxing people according to the principle of ability to pay would be most characteristic of
A.a payroll tax
B.a value-added tax
C.a general sales tax
D.a progressive income tax


12. With a regressive tax, as income
A.increases, the tax rate remains the same
B.decreases, the tax rate decreases
C.increases, the tax rate increases
D.increases, the tax rate decreases


13. Which tends to be a progressive tax in Canada?
A.income tax
B.property tax
C.sales tax
D.payroll tax


14. In a competitive market, the portion of an excise tax borne by a buyer is equal to the
A.amount the price of the product rises as a result of the tax
B.amount of the tax
C.amount of the tax less the amount the price of the product rises as a result of the tax
D.amount of the tax plus the amount the price of the product rises as a result of the tax


15. Which statement is correct?
A.The more elastic the supply, the greater the portion of an excise tax borne by the seller.
B.The more elastic the demand, the greater the portion of an excise tax borne by the seller.
C.The more inelastic the supply, the greater the portion of an excise tax borne by the buyer.
D.The more inelastic the demand, the greater the portion of an excise tax borne by the seller.


16.
R-2 31b

What is the amount of the excise tax paid by the seller in terms of price per unit sold?
A.$1
B.$2
C.$3
D.$4



17.
R-2 31b

The amount of the excise tax paid by consumers is
A.$2
B.$6
C.$12
D.$16



18.
R-2 31b

The tax revenue for government is represented by area
A.abde
B.abgf
C.fgde
D.abcde



19.
R-2 31b

The efficiency loss of the tax is represented by area
A.bgc
B.bdc
C.abcf
D.hbci



20. The efficiency loss of an excise tax is
A.greater, the greater the elasticity of supply and demand
B.greater, the less the elasticity of supply and demand
C.less, the greater the elasticity of supply and demand
D.not affected by the elasticity of supply and demand


21. Which tax is the most difficult to shift to others?
A.personal income tax
B.corporate income tax
C.specific excise taxes
D.business property taxes


22. Which hypothetical policy would likely result from a "special-interest effect"?
A.legislation further restricting how many hours per week truckers can drive
B.legislation requiring retailers to provide clearer information about discount prices
C.legislation preventing a new hockey league from forming to compete with the NHL
D.legislation protecting bank customers from excessive service charges


23. The G.S.T. basically taxes a firm's
A.revenue from the sale of a product
B.revenue from the sale of a product less the resource cost
C.purchase of resources that the firm makes to produce a product
D.value of the capital goods and property resources held by the firm


24. "Pork-barrel politics" is associated with
A.the special-interest effect
B.log-rolling effect
C.the median voter model
D.the voting paradox


25. The statement that "government extends the range of free choice for members of a society when it provides public goods and services" serves to illustrate
A.rent-seeking behavior
B.the median-voter model
C.the benefits-received principle
D.the fallacy of limited decisions



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