Coca-Cola Paper Learning Team C Microeconomics/365
Title of Paper
Title of Paper
Externalities can be positive or negative. Private goods are considered “rival and excludable” – meaning one person consuming a good means that another cannot, and those who do not pay for the goods ore service are excluded from consuming them. Public goods are the opposite they are non-rival and non-excludable; many people can enjoy them at the same time and non-payers are not excluded. Therefore, a free-rider problem is created which means an externality non-payers cannot be excluded from enjoying the good/service. Governments use their powers of taxation and subsidy to deal with externalities. Governments impose taxes for government operations that can range from collective services (military and police services, courts, roads, etc.) to a variety of transfer payments that are aimed at stabilizing economic activity (unemployment insurance and earned income credits) also to reduce poverty.
Taxes: There are two taxes that you need to know about and understand the differences and they are marginal rates which are the tax rate that effects the last dollar earned and average tax which is the product of total taxes that are paid when you divide the total taxable income. These are the 3 major taxes in the U.S. tax system:
Progressive taxes - which result in higher average rates as income increases; personal income tax is a common example.
Regressive taxes – which result in lower average tax rates as income falls; sales tax is commonly used as an example.
Proportional taxes – which maintain a constant rate irrespective of income.
References: Macroeconomics: Government – Expenditures, Taxes and Debt: By: Stephen D. Simpson
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