Scenario 20-3 Suppose That a Society Is Made Up of Five Families

question 95

Multiple Choice

Scenario 20-3
Suppose that a society is made up of five families whose incomes are as follows:
$120,000; $90,000; $30,000; $30,000; and $18,000.
The federal government is considering two potential income tax plans:
Plan A is a negative income tax plan where the taxes owed equal 1/3 of income minus $20,000.
Plan B is a two-tiered plan where families earning less than $35,000 pay no income tax and families earning more than $35,000 pay 10% of their income in taxes. The income tax revenue collected from those families earning over $35,000 is then redistributed equally to those families earning less than $35,000.
-Refer to Scenario 20-3. Assuming that utility is directly proportional to the cash value of after-tax income, which government policy would an advocate of liberalism prefer?

• A)Plan A
• B)Plan B
• C)either Plan A or Plan B
• D)neither Plan A nor Plan B because any plan that forcibly redistributes income is against the philosophy

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Definitions:

Lights Out Factory

A manufacturing plant that operates automatically without the need for human presence on-site, usually controlled by computers or robots.

Flexible Production Systems

Production methods designed to easily adapt to changes in the quantity and type of product being manufactured.

Information Technology

The use of computers, networking, and infrastructures to create, process, store, secure, and exchange all forms of electronic data.

Mass Production Systems

A method of manufacturing that uses machinery and assembly lines to produce large quantities of identical goods at a low cost.