View the step-by-step solution to:

1. (a) Explain what are consumer surplus and producer surplus. Consumer surplus is the measurement of buyer's well-being. The measurement of the

Can you review my homework and tell me if it is ok or make any changes you see fit please? thank you."

1. (a) Explain what are consumer surplus and producer surplus. Consumer surplus is the measurement of buyer’s well-being. The measurement of the seller’s well-being is producer surplus. (b) How does a change in price of a good affect both consumer surplus and producer surplus? How does the elasticity of demand affect consumer surplus? If there is a price increase for goods and services then the producers’ surplus will increase but consumer surplus will decrease. The elasticity of demand affects consumer surplus with a drastic price increase which will decrease consumer surplus and increase producer’s surplus. (c) How can taxes on a good, affect both consumer surplus and producer surplus? Taxes on a good affect both consumer surplus and producer surplus because both parties must bare the tax burden. Buyers will always pay more and sellers will receive less, however if the demand curve is relatively inelastic to the supply curve than buyers will bare more of the burden. Now if the supply curve is inelastic the seller takes on more of the tax burden. 2. What is the difference between a negative externality and a positive externality? Give three examples of each. A positive externality is when parties not involved in the transaction benefit or gain from the transaction. A negative externality is clearly the opposite of positive externality and the third party is actually harmed and doesn’t benefit from the transaction. Three examples of positive externality is planting more trees, putting a traffic light, having a job and family. Three examples of negative externality is changing oil in the street, burning garbage, and using disposable plastic. 3. Explain what measures the government can take to (a) correct negative externalities, (b) encourage positive externalities. The government can correct a negative externality by enforcing a heavier tax for the activity and create regulations to try to minimize the activity. The government should put limits on things, charge more and provide less of an opportunity to engage in the activity. The government can encourage a positive externality by using the funds collected from taxes on negative externalities for projects to increase positive externalities and encourage the engaging of the activity whenever possible. The government can also offer deals and incentives to gain more participation in positive externality functions. 4. (a) Give two arguments why wealthy taxpayers should pay more taxes than poor taxpayers.
Background image of page 1
It is very obviously that a person with a larger income should contribute more in paying taxes because there is a minority of wealthy tax payers to the majority of lower income workers that already burden the tax strain in most cases therefore the wealthy should take on more the extra funding from taxing the rich aggressively to increase and maximize the positive externality sector in positive functions the government or agencies choose to engage in. (b) Write a very brief essay trying to convince the government that Flat rate tax is best for America. In support of the flat tax plan here in America because it is a fair and just practice for all Americans. The flat tax rate will distribute tax revenue across the board equally according to income. Therefore everyone will pay their fair share that they owe to the government then no one can argue or complain that everyone in the US doesn’t contribute to the funding of America. Then we can adjust these tax revenues more evenly across the board and can focus more on using our resources to improve our society and create a more functional and useful individual 5. A flat tax plan allows individuals to deduct a standard allowance of $10,000 from their wages. Assume that the flat tax rate is 12%. Calculate the amount of income tax and the average tax rate if you were earning: a. $30,000 a year($30,000-$10,000=$20,000*.12=$2,400) $30,000-$2,400=$27,600, 12.5% you pay of your income b. $60,000 a year($60,000-$10,000=$50,000*.12=$6,000) $60,000-$6,000=$5,400, 10% you pay of your income 6. What are the advantages of a flat tax system? The advantages of having a flat tax are that all the regular deductions and loop holes in the tax laws would be eliminated. Also tax fraud and misrepresentations on your taxes will also disappear. The process of filing your taxes would be simplified to the point where only the space the size of a postcard would be needed to fill out your taxes. It can make the government more efficient and our revenue can be used more productively for society while also eliminating corporate cheats and loop whole jumps.
Background image of page 2
Sign up to view the entire interaction

Top Answer

Dear Student Please find attached... View the full answer

Economics-8212101.doc

1. (a) Explain what are consumer surplus and producer surplus. Consumer surplus is the difference between what a consumer is willing to pay
and what she actually pays. It is given by the area above...

Sign up to view the full answer

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question
Ask a homework question - tutors are online