If the Government Sets a Specific Tax and an Ad

question 118

Essay

If the government sets a specific tax and an ad valorem tax so that they raise the same amount of tax revenue,why does the ad valorem tax reduce output less than the specific tax?

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Definitions:

BA Degrees

Bachelor of Arts, an undergraduate degree awarded for completing a program of study in the arts or humanities.

Self-Fulfilling Prophecy

A forecast that, by virtue of either direct or indirect influence, ensures its own fruition through a cyclic reinforcement of belief and corresponding actions.

Stereotype

A widely held but fixed and oversimplified image or idea of a particular type of person or thing, often based on limited information.

Spotlight Effect

The belief that others are paying more attention to one's appearance and behavior than they really are.