Which of the following statements is correct? A decrease in the size of a tax al
ID: 2505597 • Letter: W
Question
Which of the following statements is correct?
A decrease in the size of a tax always decreases the tax revenue raised by that tax.A decrease in the size of a tax always decreases the deadweight loss of that tax.
Tax revenue decreases when there is a small decrease in the tax rate and the economy is on the downward-sloping part of the Laffer curve.
An increase in the size of a tax leads to an increase in the deadweight loss of the tax only if the economy is on the upward-sloping part of the Laffer curve.
Explanation / Answer
A decrease in the size of a tax always decreases the deadweight loss of that tax.
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