Answer
a. increases by less than 50% and may even decline
Work Step by Step
As the tax increases, the market size decreases and so the tax revenue does not continually increase, and can even start to fall if the tax is large enough.
Principles of Microeconomics, 7th Edition
by Mankiw, N. Gregory
Published by
South-Western College
ISBN 10:
128516590X
ISBN 13:
978-1-28516-590-5
Chapter 8 - Part III - Application: The Costs of Taxation - Quick Check Multiple Choice - Page 169: 4
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