In practice,
A) taxes are not lump sum taxes.
B) real wages affect the level of lump sum taxes.
C) the quantity of profits that the consumer received is dictated by lump sum taxes.
D) lump sum taxes affect the effective prices that consumers face in the market.
E) taxes have no distortionary effect.

Question

Quizplus · Accepted Answer

In practice, taxes are typically not lump sum taxes because lump sum taxes are fixed amounts that do not change with income or consumption levels, whereas most real-world taxes are based on income, consumption, or other economic activities.

In Practice