Suppose the government of Marina decides to pay for public radio by taxing people on the basis of the number of hours they listen to it. In order to determine the tax, it decides to conduct a survey. However, if the survey is based on voluntary self-reporting, which of the following is likely to happen?

Question

Suppose the government of Marina decides to pay for public radio by taxing people on the basis of the number of hours they listen to it. In order to determine the tax, it decides to conduct a survey. However, if the survey is based on voluntary self-reporting, which of the following is likely to happen?​

Quizplus · Accepted Answer

When a tax is based on self-reporting, there is a high likelihood of individuals understating the number of hours they listen to public radio to reduce their tax bill. This is because people may not want to pay more taxes and may try to keep their taxable income as low as possible. As a result, the tax base may be understated and the revenue collected may be insufficient. Due to voluntary self-reporting, there is no way for the government to know for sure that the reported data is accurate. This situation can lead to significant problems with tax evasion and tax collection for the government.

Suppose the Government of Marina Decides to Pay for Public