When Considering the Interplay of the Price and Quantity Effect

question 50

Multiple Choice

When considering the interplay of the price and quantity effect of different tax levels, we realize that:

• A)there is one tax level that maximizes tax revenues.
• B)tax revenues will continue to increase at all levels where the price effect outweighs the quantity effect.
• C)tax revenues will continue to decrease at all levels where the quantity effect outweighs the price effect.
• D)All of these statements are true.

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