Consider an Income Tax and a Head Tax,the Sizes of Which

question 61

Multiple Choice

Consider an income tax and a head tax,the sizes of which have been set so that the government collects the same amount of money under each tax.Which tax does the consumer prefer?

• A) The consumer is indifferent between the two taxes,since he pays the same amount of money under each tax.
• B) The consumer prefers the head tax,because it does not lower the relative wage as does the income tax.
• C) The consumer prefers the income tax,because it can be avoided by increasing the amount of leisure time consumed.
• D) The consumer may prefer either tax,depending on whether the income tax increases or decreases the number of hours of work at the optimum.

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