Assume That the Lost Output Due to Tax Distortions Is

question 79

Multiple Choice

Assume that the lost output due to tax distortions is proportional to the square of the tax rate.If the average cost of the distortion created by taxes is currently $100,and the tax rate is increased from 20% to 50%,the average cost of the distortion created by taxes will increase to

• A)$169.
• B)$225.
• C)$250.
• D)$625.

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