An optimal tax is one that minimizes the
A)external benefit.
B)total deadweight loss from the tax.
C)income taxes.
D)horizontal equity.

Question

Quizplus · Accepted Answer

An optimal tax is one that minimizes the total deadweight loss from the tax. Deadweight loss refers to the inefficiencies that are caused by taxation, such as reduced economic activity and profits. Therefore, an optimal tax seeks to minimize the deadweight loss while still raising necessary revenue for the government. External benefit, income taxes, and horizontal equity are not directly related to the goal of minimizing deadweight loss.

An Optimal Tax Is One That Minimizes the