What is the difference between a marginal tax rate and an average tax rate? Which is more important in determining the impact of the tax system on economic behavior?
What will be an ideal response?
A marginal tax rate is the fraction of each additional dollar that is paid in taxes. An average tax rate is the fraction of all income that is paid in taxes. Because people make their decisions by comparing marginal costs to marginal benefits, the marginal tax rate plays a bigger role than the average tax rate in influencing economic behavior. For example, when contemplating whether or not to work an extra hour, a person will make the decision based on the after-tax wage earned from working the last hour, which is found by multiplying the marginal tax rate by the wage rate and subtracting the result from the wage rate.
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Australia is a net exporter of wool, free trade will benefit the ________.
A. rich citizens of the Australia B. poor citizens of the Australia C. domestic consumers D. domestic producers
Economist's can justify supporting education through taxation on which of the following grounds?
A) Education generates spillover benefits. B) Low-income people could not otherwise afford education. C) Most economists are educators. D) Free education extends equal opportunity to all. E) Public education is more efficient than allowing education to be provided by the market.
In the event of a detrimental externality that affects the public interest, government action is the only solution.
Answer the following statement true (T) or false (F)
How do the concepts of market failure and failure of market outcome relate to the concept of economic efficiency?
A. Market failure means the economy is not economically efficient; failure of market outcome could happen even if the economy is economically efficient. B. Both market failure and failure of market outcome could happen even if the economy is economically efficient. C. Failure of market outcome means the economy is not economically efficient; market failure could happen even if the economy is economically efficient. D. Both market failure and failure of market outcome mean that the economy is not economically efficient.