Micro 6 - -Primary aim of a tax system is to raise revenue...

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Chapter 6 -Price Controls: -Price ceiling: a legal maximum on the price of a good or a service. (example: rent control) Chapter 21 The Budget Constraint: What the Consumer can afford -People consume less than they desire because their spending is constrained, or limited, by their income. -Budget Constraint: the limit on the consumption bundles that a consumer can afford Marginal Tax Rate- the tax rate applied to each additional dollar of income Payroll tax- a tax on the wages that a firm pays its workers Excise taxes- taxes on specific goods like gasoline, cigarettes, and alcoholic beverages. It also includes various small items, such as estate taxes and custom duties Transfer payment - a government payment not made in exchange for a good or service. Budget deficit - an excess of government spending over government receipts Budget surplus - an excess of government receipts over government spending
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Unformatted text preview: -Primary aim of a tax system is to raise revenue for the government, but there are many ways to raise any given amount of money Deadweight loss - the reduction in economic well-being of taxpayers in excess of the amount of revenue raised by the government. Administrative burden -Horizontal Equity-horizontal equity: the idea that taxpayers with similar abilities to pay taxes should pay the same amount-problem: difficult to agree on what factors, besides income, determine ability to pay Why Do Firms stay in business if profit = 0?-Recall, economic profit is revenue minus ALL costs-including implicit costs, like the opportunity cost of the owners time and money-in the zero-profit equilibrium,-firms earn enough revenue to cover these costs-accounting profit is positive...
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