ECONOMICS
MARKET FAILURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Taxes designed to reduce external costs.
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A tax designed to induce private decision makers to take account of the social costs that arise from a negative externality.
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A tax in which the average tax rate increases with income.
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A tax in which the average tax rate decreases as income increases.
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A tax in which the average rate of tax is constant regardless of income level.
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Detailed explanation-1: -A progressive tax is characterized by a more than proportional rise in the tax liability relative to the increase in income, and a regressive tax is characterized by a less than proportional rise in the relative burden.
Detailed explanation-2: -A. Charged at a decreasing rate when income of the individual increases.
Detailed explanation-3: -Definition: Progressive tax is the taxing mechanism in which the taxing authority charges more taxes as the income of the taxpayer increases. A higher tax is collected from the taxpayers who earn more and lower taxes from taxpayers earning less. The government uses a progressive tax mechanism.
Detailed explanation-4: -Increasing the tax rates on higher income group implies that the government is following progressive tax policy.
Detailed explanation-5: -India follows a progressive tax system. Under a progressive system, high-income earners pay more than low-income earners. Under a regressive tax system, low-income earners pay a higher amount of taxes than high-income earners.