Chapter 10, 11, 12
Today the typical American pays approximately what percent of income in taxes, including all federal, state, and local taxes?
25%
In 1789, the average American paid approximately what percent of income in taxes?
5%
In 1789 the percentage of the average American's income that went to pay taxes was about
5%. Today it is about 25%.
Which of the following statements is correct?
Both equity and efficiency are important goals of the tax system
According to the benefits principle, it is fair for people to pay taxes based on their ability to shoulder the tax burden.
False
Government subsidized scholarships are an example of a government policy aimed at correcting negative externalities associated with education.
False
Most economists believe that a corporate income tax affects the stockholders of a corporation but not its employees or customers.
False
Negative externalities lead markets to produce a smaller quantity of a good than is socially desirable, while positive externalities lead markets to produce a larger quantity of a good than is socially desirable.
False
One person's use of common resources does not reduce the enjoyment other people receive from the resource.
False
Organizers of an outdoor concert in a park surrounded by residential neighborhoods are likely to consider the noise and traffic cost to residential neighborhoods when they assess the financial viability of the concert venture.
False
Tolls are not effective in altering people's incentives to drive during rush hour.
False
A congestion toll imposed on a highway driver to force the driver to take into account the increase in travel time she imposes on all other drivers is an example of internalizing the externality.
True
According to the benefits principle, it is fair for people to pay taxes based on the benefits they receive from the government.
True
Antipoverty programs funded by taxes on the wealthy are sometimes advocated on the basis of the benefits principle.
True
Governments that chose to make endangered elephants private goods have met with more success protecting elephants than governments that chose to make killing elephants illegal.
True
If Dave and Jesse are the only two fishermen in town and neither is bothered by the other's fishing, the lake they fish in is not a common resource.
True
One possible solution to the problem of protecting a common resource is to convert that resource to a private good.
True
The marginal tax rate serves as a measure of the extent to which the tax system discourages people from working.
True
When firms internalize a negative externality, the market supply curve shifts to the left.
True
An externality is an example of
a market failure
The term market failure refers to
a market that fails to allocate resources efficiently.
Governments can improve market outcomes for
both public goods and common resources
Market failure can be caused by
externalities
When goods do not have a price, which of the following primarily ensures that the good is produced?
government
From the time of Benjamin Franklin to the present, the percentage of the average American's income that goes to pay taxes has
has risen from less than 5 percent to about 25 percent.
An externality is the impact of
one person's actions on the well-being of a bystander.
For most goods in an economy, the primary signal that guides the decisions of buyers and sellers is
price
For private goods allocated in markets,
prices guide the decisions of buyers and sellers and these decisions lead to an efficient allocation of resources.
The old lyric "the best things in life are free
refers to goods provided by nature or the government.
In the absence of externalities, the "invisible hand" leads a market to maximize
total benefit to society from that market.