Public Goods Taxes Chapter 11 Public vs Private
![Public Goods & Taxes Chapter 11 Public Goods & Taxes Chapter 11](https://slidetodoc.com/presentation_image_h/16aba4e8916284d85f1fe46a1796154f/image-1.jpg)
Public Goods & Taxes Chapter 11
![Public vs. Private Goods • Public Goods • Goods that are neither excludable nor Public vs. Private Goods • Public Goods • Goods that are neither excludable nor](http://slidetodoc.com/presentation_image_h/16aba4e8916284d85f1fe46a1796154f/image-2.jpg)
Public vs. Private Goods • Public Goods • Goods that are neither excludable nor rival in consumption • Private Goods • Goods that are both excludable & rival in consumption Excludable- consumer who can not pay are excluded Rival- consumption by one reduces quantity for others Public Goods examples: clean air, police protection, radio signals, national defense Private Goods: Food, Coffee, airline tickets, automobiles, etc…
![Problems with Public Goods • Free-rider- a person who receives the benefit of a Problems with Public Goods • Free-rider- a person who receives the benefit of a](http://slidetodoc.com/presentation_image_h/16aba4e8916284d85f1fe46a1796154f/image-3.jpg)
Problems with Public Goods • Free-rider- a person who receives the benefit of a good but avoids paying for it • Examples: – “Slacker” in group work at school – Volunteer for neighborhood cleanup – Fundraising for Fire Department
![Public Good Efficiency • When goods are available free of charge => market forces Public Good Efficiency • When goods are available free of charge => market forces](http://slidetodoc.com/presentation_image_h/16aba4e8916284d85f1fe46a1796154f/image-4.jpg)
Public Good Efficiency • When goods are available free of charge => market forces will not allocate resources efficiently • Government should collect taxes & provide public goods whenever Total Benefits ≥ Total Costs • Examples: – National Defense – Basic Research – Fighting Poverty – Fireworks on 4 th of July
![Tragedy of the Commons • Common Resources – “commonly” owned resources – rival in Tragedy of the Commons • Common Resources – “commonly” owned resources – rival in](http://slidetodoc.com/presentation_image_h/16aba4e8916284d85f1fe46a1796154f/image-5.jpg)
Tragedy of the Commons • Common Resources – “commonly” owned resources – rival in consumption but non-excludable – Example: fish in ocean, the environment • Tragedy of the Commons- the absence of incentives to prevent “overuse” & depletion of a common resource
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![Tragedy of the Commons Reading Tragedy of the Commons Reading](http://slidetodoc.com/presentation_image_h/16aba4e8916284d85f1fe46a1796154f/image-7.jpg)
Tragedy of the Commons Reading
![Types of Taxes • Progressive Tax– Income ↑ => Average Tax Rate ↑ – Types of Taxes • Progressive Tax– Income ↑ => Average Tax Rate ↑ –](http://slidetodoc.com/presentation_image_h/16aba4e8916284d85f1fe46a1796154f/image-8.jpg)
Types of Taxes • Progressive Tax– Income ↑ => Average Tax Rate ↑ – Example: U. S. Federal Income Tax • Regressive Tax– Income ↑ => Average Tax Rate ↓ – Example: Gasoline Tax, Bridge Tax Incidence: Who Pays? • Proportional Tax – Income ↑ or ↓ => Average Tax Rate stays the same – Example: Flat Income Tax, Corporate Taxes • Excise Tax – Flat fee per unit, paid at purchase – Example: Cigarettes, Gasoline (both are also regressive in tax incidence)
![Progressive Income Tax } Tax Brackets Example: If you Earn $100, 000 ($ 7, Progressive Income Tax } Tax Brackets Example: If you Earn $100, 000 ($ 7,](http://slidetodoc.com/presentation_image_h/16aba4e8916284d85f1fe46a1796154f/image-9.jpg)
Progressive Income Tax } Tax Brackets Example: If you Earn $100, 000 ($ 7, 000 - 0 ) x 10% = $700 (28, 400 - 7, 000 ) x 15% = 3, 210 (68, 800 - 28, 400 ) x. 25 % = 10, 100 (100, 000 - 68, 800 ) x. 28% = 8, 736 Total: $ 22, 746 Actual Tax Rate: 22. 7%
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![Top 1% pay more taxes but The income Gap has widened last 30 -Years Top 1% pay more taxes but The income Gap has widened last 30 -Years](http://slidetodoc.com/presentation_image_h/16aba4e8916284d85f1fe46a1796154f/image-11.jpg)
Top 1% pay more taxes but The income Gap has widened last 30 -Years
![EQUAL % tax cuts What best stimulates economic growth? EQUAL % tax cuts What best stimulates economic growth?](http://slidetodoc.com/presentation_image_h/16aba4e8916284d85f1fe46a1796154f/image-12.jpg)
EQUAL % tax cuts What best stimulates economic growth?
![Practice Test: Public Goods Practice Test: Public Goods](http://slidetodoc.com/presentation_image_h/16aba4e8916284d85f1fe46a1796154f/image-13.jpg)
Practice Test: Public Goods
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