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Which of the following statements do economists generally disagree on?

A) No tax revenues would be collected when average tax rates are 0%.

B) No tax revenues would be collected when average tax rates are 100%.

C) At very high average tax rates, increasing tax rates further would decrease tax revenues.

D) At an average tax rate of 50%, tax revenues are maximized for a government.

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Kristelle Balando
Kristelle BalandoLv10
3 Jan 2021

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Related questions

economic growth over the past decade in the country Tarragon has been very low. As a result the unemployment level has remained high. While discussing possible measures to improve the situation, Jane Watson, an associate at a leading research institute says that government should lower personal income tax rates. This she believes will induce people t work more which in turn will rise output. Martina Allen, an editor of a reputed newspaper, disagrees. According to her the income tax rates in Tarragon are not very high and are in fact similar to comparable countries. In her opinion, the government should lower the cooperate tax rates to encourage investments by firms. Which of the following is most strongly implied by the information given in the question? A.Jane believes that the income effect of a personal income tax cut is weaker than the substitution effect. B. the number of discouraged workers in Tarragon is high. C. corporate tax rates in Tarragon are very high. D. Tax reduction is the only fiscal policy measure that can boost economic growth in an economy that has stagnated for almost a decade. E. Marthina thinks that revenues from personal income taxes in Tarragon are more or less equal to revenues generated in comparable countries.

Are the following statements normative or positive, or do they contain both normative and positive statements?

1. A higher income tax rate would generate increased tax revenues. Those extra revenues should be used to give more government aid to the poor.

2. The study of physics is more valuable than the study of sociology, but both should be studied by all postsecondary students.

3. An increase in the price of wheat will decrease the amount of wheat purchased. However, it will increase the amount of wheat supplied to the market.

4. A decrease in the price of butter will increase the amount of butter purchased, but that would be bad because it would increase Canadians' cholesterol levels.

5. The birth rate is reduced as economies urbanize, but that also leads to an increased average age of developing countries' populations.

You graduate from college and take a job at a consulting firm with a wage of $25/hour. Your job is extremely flexible: you can choose to work any number of hours from 0 to 2,000 per year.

a. Suppose there is an income tax of the following form: Income up to $10,000: no tax Income from $10,000 to $30,000: 20% tax rate Income from $30,000 up 30% tax rate Draw your budget constraint with the tax and under a policy of no taxes. With the tax system in place, are there any points that you are particularly unlikely to choose? Why or why not?

b. Say that you choose to work 1,500 hours per year. What is your marginal tax rate? What is your average tax rate? Do these rates differ? Why or why not?

c. Suppose that the two tax rates are increased to 25% and 50%. What is the likely effect on the labour supply of the primary earner? What is the likely effect on secondary earners? Explain how the responses might differ between these groups, both in terms of underlying economic effects and in terms of the empirical evidence on labour supply responses.

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