Why do most economists believe that the Laffer argument does NOT apply to broad-based taxes?
What will be an ideal response?
Most economists believe that the supply of labor is not as sensitive to changes in tax rates as Laffer believed, so for broad-based taxes like income taxes and payroll taxes, cutting rates would simply reduce the revenues that the government collects.
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The above figure shows the costs at Barney's Bagel Bakery. At which of the following amounts of output is the AFC be the lowest?
A) at 2000 bagels B) at 3000 bagels C) at 3500 bagels D) None of the above because the AFC is constant regardless of how many bagels are produced each day.
If households could be charged differently for different types of garbage,
A) the total amount of garbage would be reduced. B) recycling would be more difficult. C) costs of collecting garbage could be kept much lower. D) billing for garbage collection would be much easier. E) there would be a change in the types of items that are disposed of as garbage.
Consider the market for bicycles. If a dealer cuts prices by 10 percent and sells 20 percent more bikes, then demand for bicycles is
a. inelastic, and total revenue will increase b. elastic, and total revenue will increase c. inelastic, and total revenue will decrease d. elastic, and total revenue will decrease e. unit elastic, and total revenue will remain the same
Opponents of indexing fear that it will lead to a(n)
A. acceleration of inflation. B. abrupt reduction of the money supply. C. shortfall of tax revenues, and increased budget deficits. D. unfair wealth transfer to debtors.