With respect to income redistribution programs, what is meant by "The Big Tradeoff," and what causes it?
What will be an ideal response?
The big tradeoff refers to the tradeoff between equity and efficiency. A dollar collected from a rich person passes through a "leaky bucket" before getting to a poor person. The poor person doesn't receive all of that dollar. The cost of administering the program takes some of that money. More importantly, redistribution creates a disincentive to work, which decreases efficiency.
You might also like to view...
Why would the supply curve of a dog-walking business be considered elastic?
(A) Because it can hire workers quickly if the price rises. (B) Because the supply of dogs changes quickly. (C) Because the supply of dog walking isn't easily expanded or reduced. (D) Because the demand for dog-walking services fluctuates.
A country produces two goods, soda and chips. It currently exports soda and imports chips. If it were to impose a tariff on chips,
a. both imports of chips and exports of sodas would rise. b. imports of chips would rise, but exports of sodas would fall. c. imports of chips would fall, but exports of sodas would rise. d. both imports of chips and exports of sodas would fall.