In the 1980s, President Ronald Reagan argued that high tax rates distorted economic incentives to work and save. In the 1990s, President Bill Clinton argued that the rich were not paying their fair share of taxes. Which of the following statements best summarizes the economic theories behind the differing philosophies?
a. President Reagan was concerned about vertical equity, whereas President Clinton was concerned about horizontal equity.
b. President Reagan was concerned about average tax rates, whereas President Clinton was concerned about horizontal equity.
c. President Reagan was concerned about marginal tax rates, whereas President Clinton was concerned about vertical equity.
d. None of the above is correct.
c
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In the production of goods and services, trade-offs exist because
A) not all production is efficient. B) society has only a limited amount of productive resources. C) buyers and sellers often must negotiate prices. D) human wants and needs are limited at a particular point in time.
Cecilia's Café is in a competitive price-searcher market. Cecilia's is currently producing where average total cost is at its minimum, and Cecilia's is earning a positive economic profit. In the long run we would expect Cecilia's output to
a. decrease and average total cost to be higher. b. decrease and average total cost to be lower. c. remain unchanged as Cecilia's is doing the best it can. d. increase and average total costs to be lower.