Which statement about taxes is INCORRECT?
A) Taxes in markets always cause deadweight losses.
B) If the good causes an external cost, taxes actually reduce deadweight loss.
C) Both taxes and tradable allowances in a market that has external costs can lead to the efficient quantity.
D) Taxes on producers cause the supply curve for the product to shift to the left.

Question

Quizplus · Accepted Answer

Taxes do not always cause deadweight losses in markets. In some cases, they can help to correct market failures, such as externalities or monopolies, and improve efficiency. However, if the tax rate is too high, it can create disincentives for work, consumption, and investment, leading to deadweight losses.

Which Statement About Taxes Is INCORRECT