Econo_Assign_2

1.a 20%,17.5%,15% b.Regressive taxation because the tax decreases as the income increases. 2.(Establishing and Enforcing the Rules of the Game) The government protects private property through the police system and they enforce contracts through our judicial system. (Promoting Competition) The government's antitrust laws promote competition and prohibit collusion. (Regulating Natural Monopolies) The government regulates natural monopolies forcing them to lower price and increase output. (Providing Public Goods)The government provides public goods such as a safer community and funds public goods with taxes. (Dealing with Externalities) The government uses taxes and regulation to discourage negative externalities such as a polluting factory and encourages positive externalities such as education with free public schools and lower cost for higher education. (Equal distribution of income) The government decides where the money goes and who should benefit from it. (Employment,price stability and economic growth) The government works to provide a healthy and strong economy by taxing and controlling the money supply through the fiscal policy and monetary policy. 3. Advantages of a corporation: Many investors can pool their funds and therefore its easy to obtain large sums to finance the business. A stockholder's liability for any loss is limited to the value of their stock and therefore stockholders enjoy limited liability. A corporation also has a life apart from its owners, which means that the corporation survives despite an ownership change. Disadvantages of a corporation: The stockholder's ability to influence corporate policy is limited to voting for a board of directors. The average stockholder of a big corporation owns only a tiny fraction of the shares and therefore has little say. Corporate income gets taxed twice- as corporated profits and as stockholder income. 4. The household plays the starring role.They serve as demanders of goods and services and depending on what they demand, determines what gets produced.They also use their limited resources in an attempt to satisfy their unlimited wants. 5. International trade benefits the U.S economy by providing us with goods and services that might not be available domestically. Also by benefiting from comparative advantage and specialization which therefore allows us to obtain goods at a lower cost. It allows us to use are resources more efficiently as well. 6. Individual income tax is the major source of federal government revenue.Payroll taxes and corporate taxes are also sources of revenue. 7. Income and sales taxes are the major sources of revenue for the state. 8.