A Taxpayer May Choose to Accept a Reduced Market Rate

question 52

Multiple Choice

A taxpayer may choose to accept a reduced market rate of return on an investment to take advantage of a tax preference associated with the investment. In such case, the taxpayer will pay a(n) :

• A)Excise tax
• B)Explicit tax
• C)Implicit tax
• D)Transaction tax

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Definitions:

Interest-Rate Cost

The cost associated with borrowing funds, typically expressed as a percentage of the total amount loaned.

Expected Rate

Expected rate often refers to the anticipated return on an investment or the predicted growth rate of an economic variable over a certain period.

Optimal Amount

The most efficient, beneficial, or ideal quantity of a good, service, or resource allocation under given circumstances.

Perfectly Elastic

Describes a situation in economics where the quantity demanded or supplied changes infinitely in response to any change in price.