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

Question

Quizplus · Accepted Answer

Proponents of cuts to income tax rates assume that workers make decisions based on marginal analysis, comparing the marginal benefit of each additional hour worked to the marginal cost. When income tax rates are reduced, the net benefit of additional work hours increases, providing an incentive for workers to work more. This assumption is based on rational decision-making behavior rather than irrational behavior, and workers are not assumed to make decisions based on social interest, making options A, B, and C incorrect. The marginal cost of each additional work hour is important in this analysis, making option E incorrect.

Proponents of Cuts to Income Tax Rates Argue That When