Suppose the Tax on Liquor Is Increased So That the Tax

question 192

Multiple Choice

Suppose the tax on liquor is increased so that the tax goes from being a "medium" tax to being a "large" tax.As a result,it is likely that

• A) tax revenue increases, and the deadweight loss increases.
• B) tax revenue increases, and the deadweight loss decreases.
• C) tax revenue decreases, and the deadweight loss increases.
• D) tax revenue decreases, and the deadweight loss decreases.

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Definitions:

Maximizing Profit

The process of making business decisions that increase a firm's earnings to its highest possible level.

Total Revenue

The total income a business receives from selling its goods or services, calculated by multiplying the price per unit by the number of units sold.

Competitive Firm

A company that operates in a market with many other firms, selling similar or identical products or services, where no single firm can influence market prices.

Total Economic

A comprehensive assessment of all economic activities within a specific region, including total revenue, expenditures, and income.