Figure 8-19 the Vertical Distance Between Points a and B Represents the Represents

question 48

Multiple Choice

Figure 8-19
The vertical distance between points A and B represents the original tax.
-Refer to Figure 8-19.The original tax can be represented by the vertical distance AB.Suppose the government is deciding whether to lower the tax to CD or raise it to FG.Which of the following statements is not correct?

• A)Compared to the original tax,the larger tax will increase tax revenue.
• B)Compared to the original tax,the smaller tax will decrease deadweight loss.
• C)Compared to the original tax,the smaller tax will decrease tax revenue.
• D)Compared to the original tax,the larger tax will increase deadweight loss.

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Definitions:

Tariff

A tax or duty to be paid on a particular class of imports or exports, often used as a tool for trade policy.

Quota

A government-imposed trade restriction that limits the number or monetary value of goods that can be imported or exported during a specified time period.

Revenue

The total income generated by a business or government from its activities, including sales of goods and services, taxes, and other sources.

Importer or Exporter

A business or country that buys goods from abroad (importer) or sells goods to foreign countries (exporter).