CH 6 Efficiency cost of taxation Flashcards
1
Q
The majority of taxes are based on what?
A
Ones ability to pay
2
Q
How taxes can affect economic agents?
A
1: wealth transfer from individual to society
2: Tax can change the behaviour
3
Q
Why Government raise the taxes?
A
To raise revenue
To redistribute income
4
Q
What is excess burden?
A
It’s loss of welfare in society when government imposes taxes
5
Q
Government should tax goods which are elastic or inelastic?
A
Inelastic
6
Q
How ratio of marginal cost is calculated?
A
EB / TR
7
Q
Excess burden can be calculated how?
A
EV / TR
8
Q
Which type of tax would not introduce inefficiency?
A
. One that doesn’t change relative prices
. a lum sump tax
. tax which doesn’t generate excess burden
