"Only in a progressive tax system does the amount of taxes increase as income increases." Do you agree or disagree? Explain
What will be an ideal response?
Disagree. In all of the three tax systems (progressive, regressive and proportional), the amount of taxes can increase as income increases. In a progressive system, however, not only the amount of taxes increases but also the percentage income paid in taxes increases as income increases.
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Consider the following hypothetical scenarios:
Scenario A: You are about to purchase a pair of 7 for All Mankind jeans for $175 and a t-shirt for $45. The sales attendant at the store tells you that the pair of jeans you wish to buy is on sale for $160 at another store, located about a 20-minute drive away. Scenario B: You are about to purchase a pair of 7 for All Mankind jeans for $175 and a t-shirt for $45. The sales attendant at the store tells you that the t-shirt you wish to buy is on sale for $30 at another store, located about a 20-minute drive away. Based on standard economic theory, under which scenario would you make the 20-minute trip to the other store? A) Scenario A because the pair of jeans is a very expensive item and $15 saving is quite substantial B) Scenario B because a $15 saving amounts to a substantial discount (about 33 percent) C) in either scenario if I think a $15 savings is worth the 20-minute trip D) in none of these scenarios if I think the $15 saving is not worth the 20-minute trip E) C and D are correct answers.
Which of the following statements regarding price elasticity of supply and the length of time for adjustment is FALSE?
A) The longer is the time period for adjustment, the greater is the price elasticity of supply. B) The longer is the time period for adjustment, the less is the extent to which resources flow into (or out of) an industry through expansion (or contraction) of existing firms. C) The longer is the time period for adjustment, the greater is the extent to which entry or (exit) of firms increases or (decreases) production in an industry. D) The shorter the time period for adjustment, the greater is the price elasticity of supply.