Econ Chapter 10, questions
A nonlegal market for regulated goods and services
A black market is a what?
Government should not interfere with consumer choices
Consumer sovereignty suggests that what?
Direct actions by the government to control the amount of an activity
Direct regulation is what?
Reduce poverty
Given that there are costs involved with government intervention in an economy, governments still choose to intervene in markets to do what?
No, government deficits depend upon spending and tax revenue
Government spending accounts for more than 40% of US national income, does this mean that government has been consistently running a budget deficit?
Inequality on one axis and social surplus on the other with a positively sloped function
How would you depict the trade-off between equity and efficiency on a graph?
No, it differs according to how taxes change incentives
Is the deadweight loss of taxation the same for different types of taxes?
Not necessarily, since the burden of the tax depends on price elasticity
Is the entire burden of a tax always borne by those on whom it is imposed?
It is fair because it reduces inequality
Is the equity implication of imposing an estate tax fair?
Laws restricting alcohol purchases, price ceilings and floors, and fishing quotas
List some examples of direct regulation.
Regressive
Lump-sum taxes are what kind of tax?
People do not always know what is best for them, and the government should encourage them to make the right choices
Paternalism is the view that what?
Income tax
Progressive tax example?
Medicare tax
Proportional tax example?
Property tax
Regressive tax example?
Tax revenue exceeds its spending
The government runs a budget surplus when what?
Individual income taxes
The largest source of revenue for the federal government is what?
Misc taxes and fees, such as tolls on roads and public transportation tickets
The largest source of revenue for the state government is what?
Progressive tax system to fund transfer payments
To reduce inequality and poverty in an economy, the government uses a what?
It is inefficient because it reduces investment
What is the efficiency implication of imposing an estate tax?
Corruption
Which of the following is a cost associated with government intervention in an economic system?
To raise revenues to pay for operations
Which of the following is a factor underlying government taxation and spending decisions?
1. The effect of a tax on labor supply depends on the amount of deadweight loss created by the tax. 2. It depends on the normative questions such as how much to tax or how much government intervention is necessary. 3. The effect of a tax on a labor supply depends on the elasticity of labor supply
Why are there two different views on the effect of taxation on labor supply in the US?
1. Raising revenues 2. Redistributing income via transfer payments 3. Financing operations 4. Correcting market failures and externalities
Why does government tax and spend?
