1.1 Which statment is TRUE in the standard model of labor supply?

a. Higher wages always lead to a reduction in the quality of labor supplied.

b. if the substitution effect dominates the income effect, higher wages lead to an incresase in the quality of labor supplied.

c. Higher wages always lead to an increase in the quantity of labor supplied.

d. if the income effect dominates the substitution effect, higher wages lead to a reduction in the quantity of labor supplied

1.2 Among the arguments against corporate taxation we have:

a. Double taxation of corporate profits, leading to distortions of the optimal size of the corporation.

b. All of the other options are correct

c. Double taxation of corporate profits, leading to vertical inequity among individuals investing in the corporate and noncorporate sectors.

d. Double taxation of corporate profits, leading to horizontal inequity among individuals investing in the corporate and noncorporate sectors.

1.3 Discuss how a tax on corporate income can influence the level of investment of corporations. Discuss at least two alternatives scenarios regarding the way the potential investment project is financed and about the economic and fiscal depreciation of its costs.

1.4 The government doubles an existing tax on a good with a price elasticity of demand E_d=0. The excess burden in this case:

a. none of the rest.

b. increase proportionally in .

c. increase more than proportionally in

d. will remain constant.

1.5 The corporation XYZ reports large profits on its income statement but pays corporate taxes which on average are far below the statutory corporate tax rate. Provide at least 4 reasons for how this can happen:

1.6 Supporters of wealth taxation argue that:

a. Wealth taxation helps increasing the concentration of wealth, which is socially desirable.

b. Wealth taxation is fair because of its regressive characteristics.

c. All or none of the answer are correct.

d. The ability to pay increases in wealth, even keeping income constant.

1.7 The exact fiscal depreciation method applicable to an asset....

a. ...matters to the corporation because different methods lead to different fiscal advantage/disadvantage

b..... does not matter to the corporation because different methods always lead to the same fiscal advantage/disadvantage.

c...matters to the corporation because different methods lead to different decisions about the optimal number of shareholders to have

d....does not matter to the corporation because the tax statment is different from the accounting statement.

1.8 A tax on net wealth:

a. decreases savings and encourages current consumption if the income effect dominates.

b. increases savings and discourage current consumption if the substitution effect dominates

c. decreases savings and encourages current consumption if the substitution effect dominates.

d. no answer is correct

1.9 There is a 20% tax on the first 15.000 euros of income , a 30% tax on income above 15.000 euros until 30.000 euros, and a 40% tax on all income above 30.000 euros. What is the average tax rate for someone eraning 35.000 euros?

a. 31.7%

b. 27.1%

c. 14.29%

d. 20%