What are two ways that raising taxes on the rich can harm society?
What will be an ideal response?
If raising taxes on the rich would cause the rich to stop doing things that generate high amounts of income, this may cause harm to society.
If raising taxes on the rich cause the rich to locate to different countries with lower tax rates and, in turn, generate high amounts of income in these other countries instead of in their original country, this can harm society.
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Suppose there are two market structures: A and B. Market A is characterized by free entry and exit of firms and firms under this structure face a horizontal demand curve. Market B has only one seller. Identify the market structures
Comment on the pricing mechanism, long-run profitability, and social surplus under both market structures.
Under a system of flexible exchange rates, transactions that increase the supply of the nation's currency to the foreign exchange market will cause the nation's
a. currency to depreciate in value. b. currency to appreciate in value. c. trade deficit to increase. d. products to become more expensive to foreigners.