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.

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Definitions:

Diaphragm

A dome-shaped, muscular partition separating the thorax from the abdomen in mammals, playing a major role in breathing.

External Intercostals

Muscles located between the ribs that assist with the mechanics of breathing by elevating the ribcage.

Gastrocnemius

A major calf muscle that plays a crucial role in walking, running, and jumping, flexing the leg at the knee and foot.