Question 1
The government imposes a tax on imported wine. As a result, fewer individuals purchase imported wine. This is an example of tax
◦ equity.
◦ shifting.
◦ evasion.
◦ incidence.
Question 2
Firms may react to a payroll tax by
◦ substituting labor for capital.
◦ reducing their output.
◦ shifting to less capital intensive techniques.
◦ hiring more labor.