What Is the Difference Between the Average and Marginal Tax

question 31

Multiple Choice

What is the difference between the average and marginal tax rates effects on the labour supply?

• A) An increase in the average tax rate will increase labour supply, but an increase in the marginal tax rate will decrease labour supply.
• B) An increase in the average tax rate will decrease labour supply, but an decrease in the marginal tax rate will decrease labour supply.
• C) There is no difference. An increase in the average tax rate and the marginal tax rate will increase labour supply.
• D) There is no difference. An increase in the average tax rate and the marginal tax rate will decrease labour supply.

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Definitions:

Nonreproducible

Refers to goods or assets that cannot be exactly replicated or duplicated, often due to uniqueness or specific characteristics.

Single-Tax Movement

The political efforts by followers of Henry George (1839–1897) to impose a single tax on the value of land and eliminate all other taxes.

Land Rent

The payment made for the use of land, typically reflecting the location's value and potential productivity.

Unearned Income

Income received from sources other than employment, such as investments, including interest, dividends, and capital gains.