Part 2 (60 points, 10 points each) Briefly respond to each of the following and be sure to explain your response.

1. What are the generally accepted principles of tax design that relate to the goal of equity?

2. A) Name at least 3 ways that the income figures used in the US Federal income tax system differ from the Haig-Simons definition of income? B) Why might it be bad that the US federal income tax code does not count all forms of income?

3. Which industry structure is more likely to pass a tax on to the consumer in the form of a higher price, monopoly or perfect competition? Why?

4. List at least 7 factors that influence the magnitude of excess burden (inefficiency) generated by a tax.

5. Give at least 2 examples of how some of the principles of tax design can conflict with each other. You can use equity principles or efficiency principles or both.

6. In a simple 2 commodity (bread and wine), 2-factor (labor and capital) model with no savings and assuming bread is more labor intensive than wine, if a tax is put on labor used to produce bread then how are wine