A Tax and a Regulation That Have the Same Effect

question 42

Multiple Choice

A tax and a regulation that have the same effect on output in the short run will have different effects in the long run._____ creates profits which encourages _____,while _____ creates losses and encourages _____.

• A)Corrective taxation;entry;regulation;exit
• B)Regulation;entry;corrective taxation;exit
• C)Corrective taxation;exit;regulation;entry
• D)Regulation;exit;corrective taxation;entry

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Definitions:

Haircuts

A reduction applied to the value of assets for purposes of calculating capital requirements, risk, or losses.

Productive

The efficiency at which an individual, company, or economy can convert input resources into useful output.

Diminish Profits

The reduction in the amount of earnings as a result of increased costs, decreased revenue, or both.

Economic Profit

The financial difference created by subtracting total explicit and implicit expenses from total revenue in a company.