Define the benefit principle. List two real world taxes that have the features of a tax based on the benefit principle. Why can't the benefit principle be the sole principle of taxation?
What will be an ideal response?
The benefit principle states that the people who benefit from the government's expenditures should be the ones who pay for them. Two real world examples of taxes that have features based on the benefit principle are entry fees for public parks and tolls for government turnpikes. The benefit principle is difficult to apply in all situations because it is often difficult to determine who is actually benefiting from a government activity and it is often in conflict with other goals such as redistribution.
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What is one problem with using a Clarke tax to finance government provision of a public good?
a. People tend to overstate their preferences for the public good when a Clarke tax is imposed. b. The government may decide against providing the public good, even when it would be efficient to do so. c. The Clarke tax is not a fair tax, because everyone pays the same amount regardless of income. d. The revenues collected from the Clarke tax may not cover the cost of the public good.
In the above figure, the total consumer surplus at the efficient level of output is ________
A) $4.5 million B) $9.0 million C) $2.5 million D) $8.5 million
Disney and Fox must decide when to release their next films. The revenues received by each studio depend in part on when the other studio releases its film. Each studio can release its film at Thanksgiving or at Christmas
The revenues received by each studio, in millions of dollars, are depicted in the payoff matrix above. Which of the following statements CORRECTLY describes Disney's strategy given what Fox's release choice may be? A) If Fox chooses a Thanksgiving release, Disney should choose a Christmas release. B) If Fox chooses a Christmas release, Disney should choose a Thanksgiving release. C) Disney should release on Thanksgiving regardless of what Fox does. D) Both answers A and B are correct.
Double-entry bookkeeping for the balance of payments requires that:
a. the current account always equal the balance of payments. b. every transaction be recorded as a credit and a debit at the same time. c. total credits always exceed total debits. d. every transaction be recorded as either a credit or a debit. e. total debits always exceed total credits.