1. Would a dynamic approach to taxation be more likely to lead to economic growt

Question

1. Would a dynamic approach to taxation be more likely to lead to economic growth than the static approach in a country with a falling tax base? What about in a country with a growing tax base? 2. If free riders cannot be excluded from consumption of a good at a reasonable cost, is this a public good? 3. Should everyone else be taxed in order to provide you with free movies? 4. The U.S. government decides to remove all restrictions on drug imports and as a result there is an increase in the number of deaths due to adverse selection. Is this the same result as with a negative externality? Could a solution to the asymmetric information problem be the same as with a negative externality? 5. What is a tax cartel and how would it effect your ability to evaluate the relative production costs among firms in a given industry that are conducting business within countries belonging to the tax cartel? 6. Why is it important for less developed countries to protect intellectual property rights? Is there any incentive for a less developed country to choose not to protect intellectual property rights? 7. City officials contract with organized crime to clean up a polluted area but instead of taking the pollution to a designated dump site that is farther away the crime syndicate dumps the pollution in the local river. Does the intersection of the increasing marginal cost of pollution abatement and the diminishing marginal benefit of pollution abatement produce a socially desirable outcome?

Explanation / Answer

1. This is true because dynamic approach will also consider the change in taxpayer's behaviour bue to the imposition of taxes like considering the change in the level of employment, expenditure of the state incurred for the tax change.

In a country with growing tax base static approach may overestimate the impact of growing tax base, as it will not consider state expediture required for this tax increase or change in level of employment. Thus, dynamic approach should be used while considering impact of a tax on economic growth.

2. Yes, because in case of public goods the extre expenditure incurred or Marginal Cost to provide the good to an individual is zero. Thus, free riders caanot be excluded.

3. Providing for free movies will not lead to social well being in the society. Taxation reveune should be used for provision of public goods or redistributing income to the poor.

4. Yes, because with no tariffs, there will be over consumption of the drugs which will lead to negative impact on the people. Pigouvian taxes should be levied on drugs to reduce their consumption.

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