A Utilitarian Government Has to Balance the Gains from Greater

question 140

Multiple Choice

A utilitarian government has to balance the gains from greater income equality against the losses from distorted work incentives. To maximize total utility, therefore, the government

• A)would never tax labor income.
• B)must always achieve a fully egalitarian society.
• C)enacts policies that only benefit the middle class.
• D)stops short of a fully egalitarian society.

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Definitions:

Restocking Costs

Expenses associated with replenishing inventory, including purchase, delivery, and storage costs.

Opportunity Cost

The cost of foregoing the next best alternative when a decision is made to choose one option over others.

Credit Commitment

An agreement by a lender to extend a specified amount of credit to a borrower under certain terms and conditions.

Promissory Note

A financial instrument in which one party promises in writing to pay a determinate sum of money to the other, either at a fixed or determinable future time or on demand.