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

question 4

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 not correct?

• A) Compared to the original tax, the larger tax will increase tax revenue.
• B) Compared to the original tax, the smaller tax will decrease deadweight loss.
• C) Compared to the original tax, the smaller tax will decrease tax revenue.
• D) Compared to the original tax, the larger tax will increase deadweight loss.

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Definitions:

Type I Error

The mistake of rejecting a true null hypothesis, or in other words, concluding that a difference or effect exists when it actually does not.

Decision Rule

A pre-determined guideline or criterion used to choose between multiple alternatives in the face of uncertainty, often based on statistical analysis.

P Value

The probability of observing the given result, or more extreme, by chance if the null hypothesis is true.

Critical Value

A threshold in hypothesis testing, which when exceeded or not met determines the outcome of the test, often leading to the rejection or acceptance of the null hypothesis.