Use the idea of interpersonal comparisons of utility to argue for a progressive income tax system where people in higher income brackets are charged higher tax rates on their extra income.
What will be an ideal response?
Since the marginal utility of money diminishes for each individual, it seems reasonable to suppose that the utility a rich person derives from his/her marginal dollar is less than the utility a poor person derives from his/her marginal dollar. If the rich person doesn't get as much utility from his/her marginal dollar, then it won't hurt them as much to tax it away as it would hurt a poor person.
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The sum of all the net benefits received by the parties to a transaction is called
A) consumer surplus. B) producer surplus. C) cooperative surplus. D) deadweight loss.
In the figure above, Joe is producing at point A. Joe's opportunity cost of producing one shirt is
A) 5/3 of a pair of pants per shirt. B) 3/5 of a pair of pants per shirt. C) 5 pairs of pants per shirt. D) 2 pairs of pants per shirt.