You Are Trying to Design a Tax System That Will

question 63

Multiple Choice

You are trying to design a tax system that will simultaneously achieve both of the following goals: 1) two people with the same total income would pay taxes of the same amount,and 2) a high-income person would pay a higher fraction of income in taxes than a low-income person.Which of the following tax systems could achieve both goals?

• A) A lump-sum tax
• B) A regressive tax
• C) A progressive tax
• D) A proportional tax

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Definitions:

Industry Supply

The total amount of a good or service that producers in a particular industry are willing and able to offer for sale at different price levels.

Negative Profits

Refers to a financial loss where expenses exceed revenues within a specific period.

Perfectly Competitive Industries

Industries in which many firms produce identical products, and entry and exit are easy, leading to zero economic profit in the long run.

Homogeneous Product

A product that is considered identical or equivalent by consumers, with no significant differences from other products in the market.