Suppose the tax on gasoline is decreased from $0.60 per gallon to $0.40 per gallon.As a result,
A)tax revenue necessarily decreases.
B)the deadweight loss of the tax necessarily decreases.
C)the demand curve for gasoline necessarily becomes steeper.
D)the supply curve for gasoline necessarily becomes flatter.

Question

Quizplus · Accepted Answer

A decrease in the tax on gasoline reduces the deadweight loss because the tax is less distortionary, leading to a more efficient allocation of resources.

Suppose the Tax on Gasoline Is Decreased from $0