Lec_25_govt

Lec_25_govt - Chapter 15: Public Goods and Tax Policy Final...

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1 • Final exam Wednesday, Dec 7, 3:00 - 6:00 p.m. in Peterson 108 • You must show your student id when you turn in final exam • 30% on Chapters 7, 9,10,11,12 • 70% on Chapters 13,14,15 • Same format as midterms but twice as long • Please do not turn in your exam before 4:00 • Practice final exam will be reviewed in discussion sections today Chapter 15: Public Goods and Tax Policy A. Definitions of public and private goods B. Valuing public goods C. Problems with private provision of public goods 1. Underprovision of public goods by the private market 2. Underprovision of collective goods by the private market D. Paying for provision of public goods 1. Progressivivity of tax structure If public good is to be provided by the government, it will be paid for with taxes Who should pay the taxes, if this is the justification for the government’s involvement? Ideal answer– suppose that: • Public goods are being provided at the point where MC = MB (social optimum) • MB = vertical sum of each individual’s willingness to pay Then if each individual contributed the amount they are willing to pay, we would just cover the costs Conclusion: Ideal solution is for each individual to be taxed the amount they personally are willing to pay for the public good Problem: How could we ever determine the willingness to pay? Reasonable assumption: the rich are willing to pay more than the poor Conclusion: if government expenditures are motivated by a public goods argument, then the rich should pay more taxes than the poor
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2 Question: how much more taxes should the rich
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Lec_25_govt - Chapter 15: Public Goods and Tax Policy Final...

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