Substitution of an Equal-Yield General Consumption Tax for an Income

question 28

Multiple Choice

Substitution of an equal-yield general consumption tax for an income tax will:

• A)improve efficiency in investment markets.
• B)impair efficiency in the labor market.
• C)increase taxes paid by those earning interest on income.
• D)both (a) and (b) are correct.

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Definitions:

Variable Component

A cost associated with the production of goods or services that varies with the level of output or sales.

Predetermined Overhead Rate

A rate calculated before the accounting period begins, used to apply manufacturing overhead costs to products by estimating fixed and variable manufacturing overhead costs for the coming period.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead to individual units of production, based on estimated costs.

MH

Often used as an abbreviation for "machine hours," representing the amount of time machines are operated in the production process.