Econ 202 ch.3

ability-to-pay tax principle

Those with a greater ability to pay, such as those earning higher incomes or those owning more property, should pay more taxes

balance of payments

A record of all economic transactions during a given period between residents of one country and residents of the rest of the world

benefits-received tax principle

Those who get more benefits from the government program should pay more taxes

cooperative

An organization consisting of people who pool their resources to buy and sell more efficiently than they could individually

corporation

A legal entity owned by stockholders whose liability is limited to the value of their stock ownership

externality

A cost or a benefit that affects neither the buyer nor seller, but instead affects people not involved in the market transaction

firms

Economic units formed by profit-seeking entrepreneurs who employ resources to produce goods and services for sale

fiscal policy

The use of government purchases, transfer payments, taxes, and borrowing to influence economy-wide variables such as inflation, employment, and economic growth

foreign exchange

Foreign money needed to carry out international transactions

Industrial Revolution

Development of large-scale factory production that began in Great Britain around 1750 and spread to the rest of Europe, North America, and Australia

Information Revolution

Technological change spawned by the microchip and the Internet that enhanced the acquisition, analysis, and transmission of information

marginal tax rate

The percentage of each additional dollar of income that goes to the tax

market failure

A condition that arises when the unregulated operation of markets yields socially undesirable results

merchandise trade balance

The value during a given period of a country's exported goods minus the value of its imported goods

monetary policy

Regulation of the money supply to influence economy-wide variables such as inflation, employment, and economic growth

monopoly

A sole supplier of a product with no close substitutes

natural monopoly

One firm that can supply the entire market at a lower per-unit cost than could two or more firms

not-for-profit organizations

Groups that do not pursue profit as a goal; they engage in charitable, educational, humanitarian, cultural, professional, or other activities, often with a social purpose

partnership

A firm with multiple owners who share the profits and bear unlimited liability for the firm's losses and debts

private good

A good, such as pizza, that is both rival in consumption and exclusive

progressive taxation

The tax as a percentage of income increases as income increases

proportional taxation

The tax as a percentage of income remains constant as income increases; also called a flat tax

public good

A good that, once produced, is available for all to consume, regardless of who pays and who doesn't; such a good is nonrival and nonexclusive, such as a safer community

quota

A legal limit on the quantity of a particular product that can be imported or exported

regressive taxation

The tax as a percentage of income decreases as income increases

sole proprietorship

A firm with a single owner who has the right to all profits but who also bears unlimited liability for the firm's losses and debts

tariff

A tax on imports

tax incidence

The distribution of tax burden among taxpayers; who ultimately pays the tax

transfer payments

Cash or in-kind benefits given to individuals as outright grants from the government

utility

The satisfaction received from consumption; sense of well-being