201C4ol - -Transfer payments income payments for which no...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
CHAPTER 4 - THE PUBLIC SECTOR -Under what circumstances do markets fail? -How can government intervention help? -How much government intervention is desirable? -Market failure: the markets are not a failure just have failed to work perfectly -Public vs. private goods: Public good--a "good" whose consumption by one person does not exclude consumption by others (police/fire protection, highways) Private good--a "good" whose consumption by one person excludes consumption by others (natural gas, car, lawn mower) -Free Rider Dilemma: An individual who reaps direct benefits from someone else's purchase/consumption of a public good (nuclear defense); unable to exclude nonpayers -Externalities--cost or benefit that a third party gets -"In The News" page 70--"passive smoke" represents external costs; the market price of cigs does not reflect these costs -Antitrust: government intervention to alter market structure or prevent abuse of market power (price control)
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: -Transfer payments: income payments for which no goods or services are received (social security, welfare, unemployment); they attempt to correct for inequity-Taxation: main function is transfer command over resources (buying power) from the private sector to the public sector-Taxes can be:-Progressive--pay a larger % as you earn more $$$ (federal income tax system)-Proportional--pay same % all the way (state sales tax; social security up to the ceiling)-Regressive--pay a lower % as you earn more $$$ (social security tax beyond the ceiling)-Figure 4.6 in text--sources of federal tax revenue-largest source = individual/personal income tax (45%)-second largest = social security tax (37%)-State and Local Revenues—(T-23):-local/cities depend heavily on property taxes-states depend heavily on sales taxes-Cost-Benefit Analysis: projects are only desirable if the benefits exceed the opportunity costs (T-Renton police)...
View Full Document

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern