Tax Credits Reduce Your

question 175

Multiple Choice

Tax credits reduce your

• A)tax liability.
• B)adjusted gross income.
• C)tax refund.
• D)tax withholding.
• E)taxable income.

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Definitions:

External Cost

External cost is a cost incurred by a third party who did not agree to the action that caused the cost, often seen in pollution or other forms of environmental impact.

MC

An abbreviation commonly used for "Marginal Cost," which refers to the additional cost incurred by producing one more unit of a good or service.

Liability Rule

A legal principle that allocates the economic burden of damages to the party responsible for causing harm.

Coase Theorem

A principle stating that if trade in an externality is possible and there are no transaction costs, parties will negotiate to produce an efficient outcome.