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15 Cards in this Set
- Front
- Back
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Ability-to-pay principle
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the principle of tax fairness by which those with greater ability to pay a tax should pay more tax.
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Accounting profit
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revenue minus explicit costs and depreciation.
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Administrative costs (of a tax)
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the resources used (which is a cost) both to collect the tax and to pay it.
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Artificially scarce good
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a good that is excludable but nonrival in consumption.
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Average tax rate on income
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the ratio of income taxes paid to income.
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Benefits principle
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the principles of tax fairness by which those who benefit from public spending should bear the burden of the tax that pays for that spending.
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Capital
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the combined value of assets; includes equipment, buildings, tools, inventory, and financial assets.
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Common resource
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a resource that is nonexcludable and rival in consumption.
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Cost-benefit analysis
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an estimate of the costs and benefits of providing a good. When governments use cost-benefit analysis, they estimate the social costs and social benefits of providing a public good.
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Decreasing marginal benefit
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marginal benefit that decreases with each additional unit of the activity.
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Economic profit
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revenue minus the opportunity cost of resources; often less than accounting profit.
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Excludable
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referring to a good, describes the case in which the supplier can prevent those who do not pay from consuming the good.
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Explicit cost
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a cost that requires an outlay of money.
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Free-rider problem
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when individuals have no incentive to pay for their own consumption of a good, they will take a “free ride” on anyone who does pay; a problem with goods that are nonexcludable.
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Implicit cost
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a cost that does not require the outlay of money; it is measured by the value, in dollar terms, of forgone benefits.
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