In Reference to Welfare Recipients, the High Effective Marginal Tax

question 74

Multiple Choice

In reference to welfare recipients, the high effective marginal tax rate on earnings

• A)encourages self-sufficiency
• B)encourages more labor market activity
• C)discourages employment
• D)increases total family income if the marginal tax rate exceeds 100 percent
• E)tends to increase welfare benefits as more income is earned up to the "means-test" threshold

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Definitions:

Panel

A group of people selected to discuss, investigate, or decide on matters pertaining to a particular subject or to give expert advice.

Intersection

The point at which two or more lines, streets, or elements meet or cross.

Long-Run Equilibrium

A state in which all factors of production and costs are variable, and firms in a competitive market have no incentive to enter or exit because they are earning normal profit.

Monopolistically Competitive Industry

An industry characterized by many firms offering products that are similar but not perfect substitutes, allowing for some degree of market power.