A Nation Shifts from a Very Progressive Tax System (With

question 10

Multiple Choice

A nation shifts from a very progressive tax system (with a higher tax rate on higher incomes) to a tax system that tax all wages at the same rate. Both systems collect about the same revenues. This shift is likely to

• A) decrease the fraction of the population getting more education.
• B) increase the fraction of the population getting more education.
• C) have no effect on the fraction of the population getting more education.
• D) increase the fraction of the population wanting to work long hours.

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Definitions:

Economies of Scale

Enterprises see cost efficiencies due to their operating scale, with the cost for every unit of output generally declining as the scale enlarges.

Economies of Scale

Describes the cost benefits that companies achieve through their operation size, where the cost for each unit produced typically falls as the scale of operation grows.

Constant Marginal Cost

A situation in which the cost of producing one additional unit of a product remains the same, regardless of the volume produced.