Principles of Macroeconomics 7th Edition

Published by South-Western College
ISBN 10: 1-28516-591-8
ISBN 13: 978-1-28516-591-2

Chapter 8 - Application: The Costs of Taxation - Questions For Review - Page 168: 5

Answer

Dead weight loss of tax rises more than proportional as taxes increase. In the end revenue may rise at first with few gains but then it will decline as dead weight loss is created.

Work Step by Step

Understand how taxes affect the daily lives of producers and consumers and how it causes an inefficient allocation of resources.
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