Progressive wage taxes cause worker leisure/consumption budgets (with leisure on the horizontal axis) to become steeper as leisure increases.

Question

Answer the following statement true (T) or false (F)

Answer 1

False

Rationale: Regressive wage taxes levy high rates on initial hours worked and lower rates on later hours -- which implies that, beginning at the leisure endowment point, the budget starts shallow and becomes steeper as we move to the left. Thus, as we move in the other direction (of leisure increasing), the budget becomes shallower.