Why Do Some Policymakers Support a Consumption Tax Rather Than

question 165

Multiple Choice

Why do some policymakers support a consumption tax rather than an income tax?

• A)The average tax rate would be lower under a consumption tax.
• B)A consumption tax would encourage people to save earned income.
• C)A consumption tax would raise more revenues than an income tax.
• D)The marginal tax rate would be higher under an income tax.

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Definitions:

Profit-Maximizing Price

The price at which a company can sell its product or service to achieve the highest possible profit.

Total Economic Profit

The distinction in monetary terms between what a company makes in total and what it spends, considering all direct and hidden costs.

Monopoly Firm

A company that is the sole provider of a product or service in a market, having significant control over pricing and market conditions.

Mutually Beneficial Trades

Transactions between parties that provide benefits to all involved, typically leading to an improvement in overall welfare.