Test 3

Question 1

A change in income that has the same effect on utility as a change in the price of a commodity

Answer 1

Equivalent variation

Question 2

The maximum number of hours an individual can work during a given period

Answer 2

Time endowment

Question 3

To minimize total excess burden tax rates should be set so that the tax induced percentage change in the quantity demanded of each good is the same

Answer 3

Ramsey Rule

Question 4

For goods that are unrelated in consumption efficiency requires that tax rates be inversely proportional to elasticities

Answer 4

Inverse elasticity rule

Question 5

When the government cannot implement an optimal tax policy because the policy is inconsistent with the governments incentives over time and taxpayers know it

Answer 5

Time inconsistency of optimal policy

Question 6

A loss of welfare above and beyond taxes collected.

Answer 6

Excess burden