Figure 8-22
-Refer to Figure 8-22.Suppose the government changed the per-unit tax on this good from $3.00 to $1.50.Compared to the original tax rate,this lower tax rate would
A)increase tax revenue and increase the deadweight loss from the tax.
B)increase tax revenue and decrease the deadweight loss from the tax.
C)decrease tax revenue and increase the deadweight loss from the tax.
D)decrease tax revenue and decrease the deadweight loss from the tax.

Question

Figure 8-22 
-Refer to Figure 8-22.Suppose the government changed the per-unit tax on this good from $3.00 to $1.50.Compared to the original tax rate,this lower tax rate would
A)increase tax revenue and increase the deadweight loss from the tax. 
B)increase tax revenue and decrease the deadweight loss from the tax. 
C)decrease tax revenue and increase the deadweight loss from the tax. 
D)decrease tax revenue and decrease the deadweight loss from the tax.

Quizplus · Accepted Answer

A lower tax rate generally decreases tax revenue but also decreases the deadweight loss, as the market distortion is reduced.

Figure 8-22 -Refer to Figure 8-22.Suppose the Government Changed the Per-Unit Tax