Question 1
The excess burden of a tax reflects a reduction of
◦ total economic surplus.
◦ total tax revenues.
◦ allocative inefficiency.
◦ both equilibrium price and quantity.
◦ economic profits generated in the economy.
Question 2
Since corporate income taxes are levied on accounting profits and not economic profits, they tend to
◦ be inefficient since they will affect the allocation of resources.
◦ introduce double taxation as individual shareholders also pay income tax on dividend income.
◦ favour the accounting profession as it boosts demand of their services.
◦ be efficient since economic profits are hard to assess.
◦ be inefficient since they fail to contribute substantially to federal revenues.
Economic and Social Development
The Parade of World Income
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