Given That the Government Wishes to Raise a Certain Amount

question 89

Multiple Choice

Given that the government wishes to raise a certain amount of tax revenue, individuals prefer:

• A)a 100% lump sum tax.
• B)a combination of a 70% excise tax and a 30% lump sum tax.
• C)a combination of a 30% excise tax and a 70% lump sum tax.
• D)a 100% excise tax.

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Definitions:

Total Utility

The complete fulfillment gained from the consumption of a specific quantity of products or services.

Total Utility

The overall satisfaction or happiness a consumer gets from consuming a particular quantity of goods or services.

Risk-neutral

A risk preference suggesting indifference between taking a risk with a potential gain or loss and a certain outcome with the same expected payout.

Utility

A measure of satisfaction, happiness, or benefit derived from consuming a product or service.