The Tax Rate That Maximizes the Revenue Generated by a Tax

question 34

Multiple Choice

The tax rate that maximizes the revenue generated by a tax

• A) is highly efficient, and therefore, the government should always seek to impose this rate.
• B) is an ideal tax rate from the standpoint of a government that wants to minimize the deadweight loss (or excess burden) accompanying taxation.
• C) is, from an efficiency standpoint, superior to any lower rate of taxation.
• D) will impose a large deadweight loss (excess burden) relative to the marginal revenues collected, and therefore, a government interested in the welfare of its citizens should select a lower tax rate.