If Countries a and B Produce Only Either Rubber Bands

question 291

Multiple Choice

If countries A and B produce only either rubber bands or paper clips, their maximum outputs are shown in the accompanying production possibilities schedules. In country B the opportunity cost of 1 rubber band is

• A)4 paper clips.
• B).25 paper clip.
• C)2 paper clips.
• D)40 paper clips.

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Definitions:

Tax Incidence

The distribution of tax burden among taxpayers; who ultimately pays the tax.

Marginal Tax Rate

The percentage of each additional dollar of income that goes to the tax.

Regressive

A term used to describe a tax system in which the tax rate decreases as the taxpayer's income increases, placing a larger burden on lower-income earners.

Ability-to-Pay Principle

A taxation principle that argues taxes should be levied according to an individual's or entity's capability to bear the tax burden.