Micro Exam 2

Micro Exam 2 - Ability-to-pay Principle the idea that taxes...

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Unformatted text preview: Ability-to-pay Principle : the idea that taxes should be levied on a person according to how well that person can shoulder the burden Accounting Profit : total rev-total exp. cost ATC = AFC + AVC ATC = TC/Q AVC = VC/Q Average Tax Rate : total taxes paid/total income; measures the sacrifice a taxpayer makes Benefits Principle : the idea that people should pay taxes based on the benefits they receive from government services (gas taxes) Diminishing Marginal Product : the marginal product of an input declines as the qty of the input increases (other things equal) Economic Profit : total rev-total costs Equity : distributing the burden of taxes ‘fairly’ Explicit Costs : require an outlay of money (paying workers wages) Fixed Costs : don’t vary with the qty of output produced Flat Tax : a tax system under which the marginal tax rate is the same for all taxpayers Horizontal Equity : the idea that taxpayers with similar abilities to pay taxes should pay the same amount Implicit Costs : don’t require a cash outlay (the opp. cost of the owner’s time): don’t require a cash outlay (the opp....
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Micro Exam 2 - Ability-to-pay Principle the idea that taxes...

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