According to the Ability-To-Pay Principle

question 170

Multiple Choice

According to the ability-to-pay principle,

• A)those with lower incomes should pay just as great a percentage of their income in taxes as those with higher incomes.
• B)foreigners who trade with the United States should pay taxes.
• C)those with higher incomes should pay more in total taxes.
• D)those with higher incomes should pay higher tax rates.
• E)those with higher incomes should pay the same amount of taxes as those with lower incomes.

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Definitions:

Variable Costs

Variable costs are expenses that change directly and proportionally with the level of production or business activity, such as raw materials and direct labor costs.

Direct Materials

Raw materials that are directly incorporated into a final product and can be easily traced to it.

Fixed Costs

Fixed costs are business expenses that do not change with the level of goods or services produced by the business, such as rent, salaries, or loan payments.

Flexible Budget

A flexible budget adjusts to changes in actual revenue or activity levels, allowing for more accurate comparisons and performance assessments.