Proponents of cuts to income tax rates argue that when income tax rates are cut, workers have an incentive to increase their work hours. This argument is based on the assumption that
A) the opportunity cost of working is negative.
B) the marginal cost of each additional work hour is not important to most workers.
C) workers are irrational.
D) workers make decisions based on the marginal benefit of each hour worked compared to the marginal cost of work.
E) workers make decisions based on the social interest.

Question

Quizplus · Accepted Answer

The argument that income tax cuts lead to increased work hours is based on the assumption that workers make decisions based on the marginal benefit of each hour worked compared to the marginal cost of work. This implies that workers are rational and will work more if the benefit (their after-tax income) is higher than the cost (the opportunity cost of their time).

Proponents of Cuts to Income Tax Rates Argue That When