Question

Q1

Assuming a perfectly efficient and benevolent government (use your imagination!) that spends tax revenue to provide public services, please make one economic argument for and against a high-tax society, and one economic argument for and against a low-tax society. Please note that this isn't a political debate course, so please keep your answers in terms of economic concepts (consumer/producer surplus, utility, dead weight loss, etc.).

Q2

Working on a farm in the U.S., my family's labor and capital costs are higher than in other developing countries, but not as high as in other countries with more limited agricultural resources. As a result, our cost of production of wheat, for example, is $4 per bushel, whereas China might be able to produce wheat for $3 per bushel, and Great Britain can produce wheat at $5 per bushel. Please describe what would happen to U.S. producers and consumers if 1) international trade was prohibited; 2) a free trade agreement was signed with both countries for wheat; and 3) the U.S. imposed a $3 tariff per bushel of imported Chinese wheat; and 4) a $3 subsidy was given to Great Britain producers (lowering their cost of production to $2).

Please typing the  Answers more than 500 words, and giving references.

Answer 1

1) for a high tax society the disposable income of people will decline and so will be there saving and investment, in this kind of a society the government expenditure will crowed out the private investment as the rate of interest will be high. in this society the poor people will be benefited the most from the public expenditure but the richer class will be burdened.

in case of a low tax society the disposable income f people will be higher as well as there saving and investment. this kind of society will prosper early because private investment leads to profit and further investment in the society. which ultimately leads to employment generation and income flow. one demerit of this society is that the poor people will suffer as the expenditure by government on basic services like health and education will be low.

2) if international trade id prohibited then consumer of the US will be in loss but the producers will earn profit as there is no other sources the consumer can get that from. if a free trade aggrement is signed with china and great bretain the US will be able to import wheat from china for 3$ and that will increase consumer welfare. and the country can export wheat to great britain as there production cost is higher than US and the producer of wheat in US will be benefited the most from it. if us imposes a 3$ tariff on import from china the price of wheat imported will be much higher than the price before trade so in this case the producer of wheat in US will be more benefitted because the import will decline. if a 3$ subsidy is given to the producer of wheat in great britain the production cost of wheat will decline and that will make them an efficient producer of wheat. in this case us will become an importer of wheat rather than an exporter and as there is free trade agreement between the two both the country will be benefitted from the trade.