In choosing the form of a tax, there is often a tradeoff between
A)allocative and productive efficiency.
B)profits and revenues.
C)efficiency and fairness.
D)fairness and profits.

Question

Quizplus · Accepted Answer

There is often a tradeoff between efficiency and fairness when choosing the form of a tax. Allocative efficiency refers to the optimal allocation of resources while productive efficiency refers to the production of goods and services at the lowest possible cost. Taxing certain goods or services can impact their allocation and production, potentially reducing efficiency. However, fairness must also be considered in tax policy as it is important to ensure that the burden of taxes is distributed fairly among individuals and businesses. Therefore, the ideal choice of tax form would balance both efficiency and fairness considerations.

In Choosing the Form of a Tax, There Is Often