Figure 8-24.The figure represents the relationship between the size of a tax and the tax revenue raised by that tax.
-Refer to Figure 8-24.For an economy that is currently at point D on the curve,a decrease in the tax rate would
A)decrease consumer surplus.
B)decrease producer surplus.
C)increase tax revenue.
D)increase the deadweight loss of the tax.

Question

Figure 8-24.The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. 
-Refer to Figure 8-24.For an economy that is currently at point D on the curve,a decrease in the tax rate would
A)decrease consumer surplus. 
B)decrease producer surplus. 
C)increase tax revenue. 
D)increase the deadweight loss of the tax.

Quizplus · Accepted Answer

According to the graph, at point D the tax rate is at the optimal level to maximize tax revenue. Therefore, a decrease in the tax rate would result in a decrease in tax revenue. Choices A, B, and D are incorrect because decreasing the tax rate would not affect consumer surplus, producer surplus, or deadweight loss.