1 The table on federal income tax rates facing various incom

1. The table on federal income tax rates facing various income groups suggest that the marginal tax rate in the United States has fallen. What would be your prediction as to how this decline in marginal tax rates could affect the quantity of Labor supplied in the United States.

2. Suppose the quality of elementary education is a public good. How might we infer the demand for elementary school quality from residential property values?

3. How could the program that redistributes income from rich to poor be considered a public good?

4. Sugar prices in the United States are several times higher than the WORLD PRICE of Sugar. This disparity results from a FEDERAL government program that keeps enough foreign produced sugar out of the United States to hold US sugar prices at a high level. The program raises the price of all sweetened foods produced in the US; it boosts food costs for the average household by more than $100 per week. Who benefits from this program? Why do you suppose it exists?

I would appreciate for all 4 questions to be answered. Thanks!

Solution

(1) A fall in marginal tax rate will increase the disposable income, which will encourage more people to join the labor force. Therefore, quantity of labor supplied will likely increase.

(2) If quality of elementary education is a public good, users benefitting from education don\'t need to pay for it. So, in order to get quality education, parents will decide to live near good quality elementary schools. The residential property will experience high demand nearby such schools, and higher demand will increase their price.

(3) Such a program can be considered as a public good because it is free (beneficiaries to whom such income gets transferred don\'t have to pay in order to avail the benefit), non-exclusive (one beneficiary availing this income transfer will not preclude another beneficiary to be excluded), and non-rival (one beneficiary being benefitted from such income transfer will not decrease the amount available to another beneficiary).

(4) The sugarcane farmers and sugar producers benefit from this program, since they get higher price for the sugar they sell.

Such programs are often devised to boost a specific industry, in this case, the sugar industry. Even though I\'m not an agriculturalist, it is highly likely that if the government withdraws this artificially-inflated price support, US domestic sugar producers will be unable to compete with cheaper imported sugar, and the industry will collapse. This is a form on industry protection extended by the government.