Many economists believe that
A. once a negative income tax system was in place, the United States could increase economic equality indefinitely without reducing economic efficiency.
B. a negative income tax would be less efficient than the current welfare system.
C. replacing the current welfare system with a negative income tax would increase both economic efficiency and economic equality.
D. None of the above is correct.
Answer: C
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Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly. Which of the following statements regarding economic surplus in each market structure is true?
A) Under perfectly competitive conditions, economic surplus is equal to consumer surplus; there is no producer surplus because firms are price takers. Under monopoly conditions, economic surplus is equal to producer surplus. B) Under perfectly competitive conditions, economic surplus in this industry is maximized. Under monopoly conditions economic surplus is minimized. C) Under perfectly competitive conditions, economic surplus is maximized. Under monopoly conditions economic surplus is less than under perfect competition and there is a deadweight loss. D) Under perfectly competitive conditions, economic surplus in this industry equals consumer surplus plus producer surplus. Under monopoly conditions, some consumer surplus is transferred to producer surplus, but economic surplus is the same as it was under perfectly competitive conditions.
Which of the following results from the market system of resource allocation?
a. Equitable distribution of resources b. High opportunity cost of production c. Excess supply of goods and services resulting in decreased profits d. Unequal distribution of income and wealth e. Allocation of the goods and services to those who need them the most