Microeconomics: Private and Public Choice (MindTap Course List)
Microeconomics: Private and Public Choice (MindTap Course List)
15th Edition
ISBN: 9781285453569
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 7, Problem 3CQ

Recent research confirms that the demand for cigarettes is not only inelastic, but it also indicates that smokers with incomes in the lower half of all incomes respond to a given price increase by reducing their purchases by amounts that are more than four times as large as the purchase reductions made by smokers in the upper half of all incomes. How can the income and substitution effects of a price change help explain this finding?

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Discuss the preferred deterrent method employed by the Zambian government to combat tax evasion, monetary fines. As noted in the reading the potential penalty for corporate tax evasion is a fine of 52.5% of the amount evaded plus interest assessed at 5% annually along with a possibility of jail time. In general, monetary fines as a deterrent are preferred to blacklisting of company directors, revoking business operation licenses, or calling for prison sentences. Do you agree with this preference? Should companies that are guilty of tax evasion face something more severe than a monetary fine? Something less severe? Should the fine and interest amount be set at a different rate? If so at why? Provide support and rationale for your responses.
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Discuss the preferred deterrent method employed by the Zambian government to combat tax evasion, monetary fines. As noted in the reading the potential penalty for corporate tax evasion is a fine of 52.5% of the amount evaded plus interest assessed at 5% annually along with a possibility of jail time. In general, monetary fines as a deterrent are preferred to blacklisting of company directors, revoking business operation licenses, or calling for prison sentences. Do you agree with this preference? Should companies that are guilty of tax evasion face something more severe than a monetary fine? Something less severe? Should the fine and interest amount be set at a different rate? If so at why? Provide support and rationale for your responses.
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