Explain why lump-sum taxes will not cause any losses in efficiency. Are lump-sum taxes feasible? Lump-sum taxes do not result in substitution effects, but they do affect prices. Is this a contradiction?© BrainMass Inc. brainmass.com March 21, 2019, 10:35 pm ad1c9bdddf
Explain why lump-sum taxes will not cause any losses in efficiency.
A lump-sum tax is defined by the condition that no change in behavior can affect the level of the tax. Lump-sum tax does not prevent prices from being equal to the marginal cost and social benefit of good and services. Such a tax transfers resources from private ...
Lump-sum taxes are clarified in this solution.