Figure 8-17 the Vertical Distance Between Points a and B Represents the Represents

question 251

Multiple Choice

Figure 8-17
The vertical distance between points A and B represents the original tax.

-Refer to Figure 8-17.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 correct?

• A) Compared to the original tax, the larger tax will decrease both tax revenue and deadweight loss.
• B) Compared to the original tax, the smaller tax will increase both tax revenue and deadweight loss.
• C) Compared to the original tax, the larger tax will decrease tax revenue and increase deadweight loss.
• D) Both a and b are correct.

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