When Paul listened to the presidential candidate debates,he heard one candidate proposing to increase taxes and the other candidate responding that this would cause firms to decrease production.How would this be described by an economist?

Question

Quizplus · Accepted Answer

The economic principle behind the candidate's statement is that taxes act as a cost for firms, and as the cost of producing goods and services increase, firms are likely to decrease the quantity of goods and services they supply to the market. Therefore, an increase in taxes causes a decrease in supply.

When Paul Listened to the Presidential Candidate Debates,he Heard One