Chapter 14 Self-test questions

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Which of the following is not an indirect tax?

Income tax correct incorrect

Value added tax correct incorrect

Excise duty correct incorrect

Airport tax correct incorrect

Stamp duty correct incorrect

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Which of the following is not a direct tax?

Corporation tax correct incorrect

Income tax correct incorrect

Inheritance tax correct incorrect

Corporation tax correct incorrect

Value added tax correct incorrect

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Merit goods are:

Goods that people deserve to be able to afford correct incorrect

Goods that governments believe identify to be especially important so that consumption of these goods should be encouraged in some way correct incorrect

Goods that governments supply correct incorrect

Goods that well-off consumers choose to buy correct incorrect

Goods that make people healthier correct incorrect

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Horizontal equity differs from vertical equity in that:

Horizontal equity deals with flat taxes but vertical equity deals with progressive taxes correct incorrect

Horizontal equity relates to poor people but vertical equity deals with the rich correct incorrect

Horizontal equity affects people experiencing similar economic conditions but vertical equity will involve treating people differently according to their circumstances to minimise the inequality between them correct incorrect

Horizontal equity is conducted by the private sector whilst vertical equity is conducted by the government correct incorrect

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If the Lorenz curve of country A bends closer to the diagonal than country B's, it means ________.

Incomes in country A are less equal compared to country B correct incorrect

Incomes in country A are more equal compared to country B correct incorrect

Country A has higher taxes compared to country B correct incorrect

Country A has lower taxes compared to country A correct incorrect

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Progressive taxes mean that people earning more:

Pay less correct incorrect

Pay more correct incorrect

Get tax breaks correct incorrect

None of the above correct incorrect

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Transfer payments _____

Are primarily used for income distribution correct incorrect

Increase total output in the country correct incorrect

Include corporate and income taxes correct incorrect

None of the above correct incorrect

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Externalities can represent _______

Indirect external costs of government intervention correct incorrect

Internal cost of government intervention correct incorrect

Direct external cost of government intervention correct incorrect

None of the above correct incorrect

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The following are maximizing groups under public choice theory except:

Investors correct incorrect

Elected officials correct incorrect

Voters correct incorrect

Civil servants correct incorrect

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The concept of rational ignorance suggests that:

The cost of gaining thorough understanding of complex issues outweighs the benefits associated with voting based on the knowledge. correct incorrect

All voters are uninformed correct incorrect

Voters do not know who to vote for correct incorrect

None of the above correct incorrect