In Practice

question 57

Multiple Choice

In practice,

• A) taxes are not lump sum taxes.
• B) real wages affect the level of lump sum taxes.
• C) the quantity of profits that the consumer received is dictated by lump sum taxes.
• D) lump sum taxes affect the effective prices that consumers face in the market.
• E) taxes have no distortionary effect.

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Definitions:

Opportunity Cost

is the value of the next best alternative forgone as a result of making a particular choice, highlighting the trade-offs in decision-making.

Absolute Advantage

The ability of a country or individual to produce a good or service more efficiently than others, using fewer resources.

Terms Of Trade

How much of one good exchanges for a unit of another good.

Comparative Advantage

The ability of a country or entity to produce a particular good or service at a lower opportunity cost than others, leading to more efficient international trade.