Micro2

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excise tax

Back 1

a tax charged on each unit of a good or service that is sold

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Tax Incidence

Back 2

the incidence of a tax is a measure of who really pays for it

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Benefits principle

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according to the benefits principle of tax fairness, those who benefit form public spending should bear the burden of the tax that pays for that spending

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ability to pay principle

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according to the ability to pay principle of tax fairness, those with greater ability to pay a tax should pay more tax

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marginal tax rate

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the marginal tax rate is the percentage of an increase in income that is tax away

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progressive tax

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a progressive tax takes a larger share of the income of high-income taxpayers than of low-income taxpayers

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regressive tax

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a regressive tax takes a smaller share of the income of high-income tax payers than of low-income taxpayers

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proportional tax

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a proportional tax is the same percentage of the tax base regardless of the taxpayer's income or wealth

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principle of comparative advantage

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the advantage conferred on an individual or nation in producing a good or service if the opportunity cost of producing the good or service is lower for that individual or nation than for other producers

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factor endowments

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commonly understood as the amount of land, labor, capital, and human capital that a country possesses and can exploit for manufacturing

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factor intensity

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the factor intensity of production of a good is a measure of which factor is used in relatively greater quantities than other factors in production

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bilateral trade agreements

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the exchange of good or services between two countries, by reducing or eliminating tariffs, import quotas, export restraints and other trade barriers

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implicit costs

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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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fixed costs

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a cost that does not depend on the quantity of output produced; the cost of a fixed input

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variable costs

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a cost that depends on the quantity of output produced; the cost of a variable input

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marginal costs

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the additional cost incurred by producing one more unit of a good or service

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marginal benefit

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he additional benefit derived from producing one more unit of a good or service

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present value

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the amount of money needed at the present time to produce, at the prevailing interest rate, a given amount of money at a specified future time

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future value

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it measures the nominal future sum of money that a given sum of money is worth at a specified time in the future assuming a certain interest, or more generally, rate of return is present.

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Principle of diminishing marginal utility

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the principle of diminishing marginal utility says that each successive unit of a good or service consumed adds less to total utility than the previous unit

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autarky

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autarky is a situation in which a country does not trade with other countries

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Hecksher-Ohlin Theorem

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according to the Heckscher-Ohlin model, a country has a comparative advantage in a good whose production is intensive in the factors that are abundantly available in that country

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Tariff

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a tariff is a tax levied on imports

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indifference curves

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an indifference curve is a line that shows all the consumption bundles that yield the same amount of total utility for an individual

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production function

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the relationship between the quantity of inputs a firm uses and the quantity of output it produces

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short run vs long run

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short run: fixed inputs and fixed costs are present

long run: no fixed costs or inputs

In the long run all inputs are variable but in the short run at least one variable is fixed

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law of diminishing returns

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The law of diminishing returns states that in all productive processes, adding more of one factor or production, while holding all others constant, will at some point yield lower per-unit returns

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marginal product

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the marginal product of an input is the additional quantity of output that is produced by using one more unit of that input

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returns to scale

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Increasing... when long-run average total cost declines as output increases
Decreasing... when long-run average total cost increases as output increases
Constant... when long-run average total cost is constant as output increases

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perfectly competitive industry versus monopoly

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compared with a competitive industry monopolies:
- produce a smaller quantity
- charge a higher price
- earns a profit