Economics : Microeconomics

• What is a characteristic of direct taxes?

  They cannot be shifted to others
• At what stages is VAT applied?

  At each step of production and distribution
• How does tax liability differ for individuals and businesses?

  Individuals vary by income or property ownership
• What is the impact of using a mix of direct and indirect taxes on government revenue?

  • Ensures stable revenue streams
  • Balances predictability and volatility
  • Provides diverse funding sources
• What policy changes could help reduce welfare loss?

  • Reducing tax rates
  • Removing per-unit taxes
  • Implementing other tax instruments with less impact on quantity traded
  • Addressing market failures that lead to welfare loss
• If a per-unit tax is doubled, what happens to the welfare loss?

  • The tax per unit increases
  • The new supply curve shifts further inwards
  • The welfare loss area significantly increases
• Why does a per-unit tax cause welfare loss?

  Because it reduces the quantity traded, leading to a decrease in total surplus
• What does tax burden refer to for individuals?

  It can reduce disposable income
• What are the key principles of taxation?

  1. Equity: based on ability to pay
  2. Neutrality: minimizes welfare loss
  3. Simplicity: easy to understand
  4. Transparency: clear rates and rules
• What is the effect of indirect taxes on market efficiency?

  They create a welfare loss and reduce efficiency
• Can indirect taxes be shifted?

  Yes, they are shifted to consumers
• How do the principles of taxation balance government revenue and tax impact?

  • Ensure fairness in tax burden
  • Minimize negative effects on economy
  • Maintain clarity in tax obligations
  • Support compliance and understanding
• How can direct taxes incentivize individuals?

  They can encourage savings or retirement planning
• What is the effect of direct taxes on businesses' profit management?

  They can motivate efficient profit management
• What happens to individuals with higher incomes regarding direct taxes?

  They are taxed at higher rates
• How does producer surplus change after the imposition of a per-unit tax?

  It decreases the area of welfare loss
• What is the nature of sales tax?

  A fixed percentage added to retail sales
• What are the two sources of the total surplus?

  • Consumer surplus
  • Producer surplus
• How does consumer surplus change after the imposition of a per-unit tax?

  It decreasesthe area of welfare loss