The optimal taxation system is a tax system that
A. minimizes the overall excess burden.
B. maximizes tax revenues.
C. is highly progressive.
D. minimizes the total tax burden.
Answer: A
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With respect to labor supply, the substitution effect means a
A) person increases his or her hours of labor in response to a higher wage rate. B) person decreases his or her hours of labor in response to a higher wage rate. C) person substitutes high paying work for low paying work. D) firm substitutes capital for labor.
In general, the more elastic a demand curve is the:
A. flatter it will be. B. steeper it will be. C. more bowed-in it will be. D. faster it will shift when price changes.
The price elasticity of demand of science fiction novels is 2.3. Demand is
a. inelastic. b. unit elastic. c. elastic. d. elasticity.
Substitution bias:
a. overstates the rise in a consumer’s true cost of living. b. understates the rise in a consumer’s true cost of living. c. overstates the decrease in a consumer’s true cost of living. d. understates the decrease in a consumer’s true cost of living.