Econ 101, Part 10: Checkpoint 1

Quick checkpoint - five questions on public economics, the Laffer curve, the Ramsey rule, Pigouvian taxes and third-party reporting.

Question 1 of 5 What are the two main goals public economics balances?

Speed and size Efficiency and equity Imports and exports Wages and rents

Many policies involve trade-offs between efficiency and fairness.

Question 2 of 5 What does the Laffer curve show?

Revenue always rises with tax rates Revenue is zero at 0 and 100 percent rates and peaks in between Taxes never affect behaviour Only corporations pay taxes

Beyond a point, higher rates can reduce revenue.

Question 3 of 5 According to the Ramsey rule, which goods should be taxed more to minimise efficiency losses?

Goods with very elastic demand Goods with inelastic demand Luxury goods only No goods

Inelastic goods change little in quantity when taxed, but they are often necessities.

Question 4 of 5 What is a Pigouvian tax?

A tax on income A tax set to reflect the external cost of a harmful activity A tax on imports A lottery

It makes polluters consider the harm they cause others.

Question 5 of 5 What did the Danish tax study find?

Everyone evades taxes equally Evasion was near zero for third-party-reported income Tax rates don't matter Self-reported income had no evasion

Information, not just honesty, drives compliance.

← Back to Why People Pay Taxes: Third-Party Reporting Next lesson → Why Governments Provide Social Insurance

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