A larger tax always generates a larger deadweight loss.

Question

Quizplus · Accepted Answer

A larger tax leads to a greater reduction in economic activity and consumption, which results in a larger loss of economic welfare or deadweight loss. This is because the larger the tax burden, the more difficult it becomes for individuals and firms to engage in activities that would benefit the economy. Thus, the larger the tax, the larger the negative impact on economic growth and efficiency.

A Larger Tax Always Generates a Larger Deadweight Loss