Question

Figure 8-23. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. Tax Revenue - Nwao Tax Size Refer to Figure 8-23. If the economy is at point A on the curve, then a decrease in the tax rate will increase the deadweight loss of the tax and increase tax revenue. increase the deadweight loss of the tax and decrease tax revenue. decrease the deadweight loss of the tax and decrease tax revenue. decrease the deadweight loss of the tax and increase tax revenue.

Answer 1

1) If the economy is at point A omcurve , a decrease in tax rate will dead weight loss of tax and decrease tax reveue.

so 3rd option is correct.

2) With free trade consumer surplus is given by

CS = 1/2(60 - 20)(80)

= 1/2(40)(80)

= 40$\times$40

= 1600 and

PS = 1/2(20 - 0)(20 - 0)

= 1/2(20)(20)

= 200

first option is correct.