Proponents of cuts in 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) workers are irrational.
B) workers make decisions based on the marginal benefit of each hour worked compared to the marginal cost of work.
C) the opportunity cost of working is negative.
D) the marginal cost of each additional work hour is not important to most workers.
E) workers make decisions based on the social interest.

Question

Quizplus · Accepted Answer

This argument assumes that workers make decisions based on the marginal benefit they receive for each hour worked compared to the marginal cost of work. By lowering income tax rates, workers will receive a higher net wage per hour, which in turn increases the marginal benefit of working additional hours. Therefore, workers have an incentive to increase their work hours, which can lead to an increase in overall economic activity.

Proponents of Cuts in Income Tax Rates Argue That When