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