Questions for Review without Answers
Chapter 19. Markets and the Government III. Taxation
I. Basics. All Sorts of Taxes
1) List the most important sorts of direct and indirect taxes.
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2) Explain how VAT works.
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3) What is the difference between present indirect taxes such as VAT and sales taxes and the proposed consumption tax?
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4) Define tax incidence.
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II. Taxes and Equity
5) Explain the benefit rule.
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6) And the ability-to-pay rule.
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7) Why do wealthy people pay more when tax rates are proportional?
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8) Distinguish between a flat-rate tax and a poll tax.
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9) Why are indirect taxes always regressive?
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10) What is the difference between the average tax rate and the marginal tax rate?
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III. Taxes and Efficiency
11) Explain why and how taxes create disincentives.
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12) And why they cause excess burdens.
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13) Draw the Laffer curve and explain it.
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IV. An Excursus on Post-War Taxation
14) What tax reforms did Milton Friedman propose?
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