Econ exam three definitions
Which of the following is an example of a tax based on the benefits principle?
A toll road
Public schools, parks, libraries, and roads are paid for largely through tax revenue because
these goods create a free-rider problem
Which of the following is a common resource?
timber in a public forest
The goal of requiring licenses for hunting and fishing is
to reduce the use of a common resource
Which of the following quotations illustrates the Tragedy of the Commons?
"What is common to many is taken least care of, for all men have greater regard for what is their own than for what they possess in common with others."
Which of the following is a way to address an externality problem?
- Command and control solution - Corrective tax - Corrective subsidy
Because taxes distort incentives, they typically result in
-deadweight loss -reductions in consumer surplus -reduction in producer surplus
Who pays a corporate income tax?
-owner of the corporation -customers of the corp -workers of the corp
An over crowded beach is an example of
A Tragedy of the Commons
A quota is
A limit on the quantity of imports
Which of the following is an example of an externality?
All of the above are correct
Which of the following is not a characteristic of pollution permits?
Allowing firms to trade their permits reduces the total quantity of pollution beyond the initial allocation
In which of the following tax systems do taxes increase as income increase?
Both proportional and progressive
The Mansfield Public Library has a large number of books that anyone with a library card may borrow. Anyone can obtain a card for free. Because the number of copies of each book is limited, not everyone can have the same book at the same time. What type of good would the library books be classified as in this case?
Common resources
If the government decides to build a new highway, the first step would be to conduct a study to determine the value of the project. The study is called
Cost-benefit analysis
The average tax rate measures the
Fraction of income paid in taxes
Suppose that the Town of Mapledale is considering hiring an additional firefighter. The expected benefit is estimated to be worth $5 for each of Mapledale's 15,000 residents. What should the city do?
Hire the firefighter if the cost of the new firefighter is less than $75,000
The notion that similar taxpayers should pay similar amounts of taxes is known as
Horizontal equity
In the united states, the marginal tax rate on individual federal income tax
Increases as income increases
A positive externality
Is a benefit to someone other than the producer and consumer of the good.
Economists play an important role in the complex debates over tax policy by
Shedding light on the trade off between efficiency and equity in tax policy
Since air pollution creates a negative externality,
Social welfare will be enhanced when some, but not all air pollution is eliminated
The Tragedy of the Commons for sheep grazing on common land can be eliminated by the government doing each of the following except
Subsidizing sheep flocks
The concept that people should pay taxes based on the benefits they receive from government services is called
The benefits principle
Part of the administrative burden of a tax is
The hassle of filling out tax forms that is imposed on taxpayers who comply with the tax
Mike Miller is the town manager of Medfield, a town with 50,000 residents. At a recent town meeting, several citizens proposed building a large public swimming pool in the center of town for all of the residents to enjoy. A survey of all 50,000 residents revealed that the pool would be worth $50 to each of them. The cost to build the swimming pool is $1,000,000. Which of the following is the most efficient option?
The pool should be built and paid for by the town government and paid for with a tax on the residents because all residents would benefit from it but some residents would not donate if they were asked.
The privately-owned school system in Smalltown has a virtually unlimited capacity. It accepts all applicants and operates on both tuition and private donations. Although every resident places value on having an educated community, the school's revenues have suffered lately due to a large decline in private donations from the elderly population. Since the benefit that each citizen receives from having an educated community is a public good, which of the following would not be correct?
The private market is the best way to supply education
The dead weight loss of a tax is
The reduction in economic welfare of taxpayers that exceeds the revenue raised by the government
The greatest difficulty with cost-benefit analysis of a pubic project is determining
The value or benefit of the project
Under which of the following scenarios would a park be considered a common resource?
Visitors can enter the park free of charge, but frequently all of the picnic tables are in use
Which of the following goods is rival in consumption and exludable?
a box of sparklers
When the social cost curve is above a product's supply curve
a negative externality exists in the market
Tax incidence refers to
Who bears the tax burden
A cost-benefit analysis of a highway is difficult to conduct because analysts
Will have difficulty estimating the value of the highway
Which of the following is a difference between corrective taxes and trad-able pollution permits
With a corrective tax the government sets the price of pollution: with tradable pollution permits, demands and supply set the price of pollution.
When the government taxes labor earnings we can expect people to
Work less and enjoy more leisure
Which of the following goods is rival in consumption and excludable?
a DVD
The Tragedy of the Commons will be evident when a growing number of sheep grazing on the town commons leads to a destruction of the grazing resource. To correct for this problem, the town could
auction off a limited number of sheep-grazing permits.
Vertical equity states that taxpayers with a greater ability to pay taxes should
contribute a larger amount than those with a lesser ability to pay
The resources that taxpayer devotes to complying with the tax laws are a type of
dead weight loss
Which of the following goods is excludable but not rival in consumption?
fire protection in a small town
Negative externalities lead markets to produce
greater than efficient output levels and positive externalities lead markets to produce smaller than efficient output levels
Incentives to work and save are reduced when
income taxes are higher
A tariff on a product
increases the domestic quantity supplied
Because of the free-rider problem,
private markets tend to under supply public goods
When the government intervenes in markets with externalities, it does so in order to
protect the interests of bystanders
A free rider is a person who
receives the benefit of a good but avoids paying for it
An externality
results in a equilibrium that does not maximize the total benefits to society
A major difference between tariffs and import quotas is that
tariffs raise revenue for the government, but import quotas create surplus for those who get the licenses to import
The largest source of federal revenue in the United States is:
the individual income tax
