One argument advanced in favor of not increasing the income tax on individuals with high income is that
A) increasing income tax increases wealth which contributes to increases in GDP.
B) increasing the income tax on these individuals will reduce economic efficiency.
C) not increasing income taxes will discourage corporations from increasing investment.
D) increasing the income tax affects mostly middle-income and low-income individuals who are already paying heavy income taxes.
Question 2
Suppose Veronica sells teapots in the perfectly competitive teapot market. Her output per day and her costs are as follows:
Output per Day Total Cost
0 20
1 32
2 37
3 48
4 61
5 75
6 92
7 113
8 136
Suppose the current equilibrium price in the teapot market is 10. To maximize profit, how many teapots will Veronica produce, what price will she charge, and how much profit (or loss) will she make? Draw a graph to illustrate your answer. Your graph should include Veronica's demand, ATC, AVC, MC, and MR curves, the price she is charging, the quantity she is producing, and the area representing her profit (or loss).
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