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WAEC Economics 2004 Question 40

Question 40

Public Finance

One disadvantage of direct taxes is that

  1. A.government's revenue is reduced
  2. B.price of essential commodities fall
  3. C.people are discouraged from additional work
  4. D.firms make more profits
Show the answer and explanation

Answer: C (people are discouraged from additional work)

Explanation

High income taxes reduce the reward for extra work, so they may discourage effort.