Assume That the Lost Output Due to Tax Distortions Is

question 89

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 $1000,and the tax rate is increased from 40% to 50%,the average cost of the distortion created by taxes will increase to

• A)$383.33.
• B)$450.00.
• C)$640.
• D)$1562.50.

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Definitions:

Producer Surplus

The difference between what producers are willing to accept for a good versus what they actually receive in the market, reflecting extra benefit or profit.

Gain In Producer Surplus

An increase in the difference between what producers are willing to accept for a good versus what they actually receive.

Total Surplus

The sum of consumer surplus and producer surplus in a market, representing the total net benefit to society from the production and consumption of a good or service.

Chocolate Market

The economic marketplace that encompasses the production, distribution, and sale of chocolate products.