Assume That the Lost Output Due to Tax Distortions Is

question 53

Multiple Choice

Assume that the lost output due to tax distortions is proportional to the square of the tax rate.If the government increased the tax rate from 25% to 40%,the lost output would increase by a factor of

• A)1.56.
• B)1.60.
• C)1.96.
• D)2.56.

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