The Benefits Principle of Fairness of Taxes Is the Proposition

question 184

Multiple Choice

The benefits principle of fairness of taxes is the proposition that

• A) taxes should only be used to correct market failures.
• B) people should pay taxes according to how easily they can bear the burden.
• C) tax systems can only be fair if all people agree on them.
• D) people should pay taxes equal to their benefit from public services.
• E) the incidence of taxes should be equal across households.

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Definitions:

Short-run

A period of time in which at least one input is fixed and cannot be changed, affecting the capacity to adjust production levels.

Long-run Equilibrium

A state in which all factors of production and inputs can be fully adjusted, and there are no fixed variables, resulting in market supply equalling market demand.

Marginal Cost

Marginal cost is the change in total production cost that comes from making or producing one additional unit of a good.

Perfectly Competitive

Refers to a market structure where there are many buyers and sellers, all producing homogenous products, with no single participant having the power to influence the market price.