Over a period of years, many European countries replaced their transaction taxes with a value added tax. Give two reasons why this was done. What will be an ideal response? ANSWER The first reason why this was done was because transaction taxes are inefficient because they tax the same good multiple times. The second […]
Third parties do not elect large numbers of candidates in democratic countries with majority rule elections. a. True b. False ANSWER a
Employer provided health care limits the moral hazard problem to a large degree. a. True b. False ANSWER b
Assume the United States is considering either a tariff or a quota to protect motorcycles. For each of the following groups, list whether they should prefer either the tariff or the quota, or be indifferent between the two: importer of motorcycles, taxpayers, foreign producer of motorcycles. ANSWER The importer of motorcycles will prefer the […]
A good may be inferior at some income levels and normal at others. What will be an ideal response? ANSWER True. A consumer may demand more of the good at low income levels and less of the good at higher income levels. Hamburger or macaroni and cheese dinners may be examples of such goods. […]
The costs associated with the overproduction of medical services as a result of comprehensive health insurance are passed on to everyone who has health insurance in the form of higher premiums. a. True b. False ANSWER a
Compare and contrast a general retail sales tax with a value added tax. What will be an ideal response? ANSWER Both taxes have the same tax base. A general retail sales tax is easier to compute, requires less monitoring by the government, is more transparent to taxpayers, and imposes a taxpaying burden of fewer […]
Make an argument for user charges being both efficient and equitable. What information can user charges provide us that free provision can not? What will be an ideal response? ANSWER User charges can be considered equitable from the benefit principle of taxation since individuals have to pay in proportion to the benefits they receive […]
If voters do not have single-peaked preferences then a cyclical majority will arise. a. True b. False ANSWER b
Elections tend to be closer when one candidate is extremely to the right or left. a. True b. False ANSWER b
