"To minimize total excess burden, tax rates should be set so that the percentage reduction in the quantity demanded of each commodity is the same." This is the definition of
A)the Corlett-Hague rule.
B)the inverse elasticity rule.
C)the benefits-received principle.
D)the Ramsey Rule.

Question

Quizplus · Accepted Answer

The Ramsey Rule suggests setting tax rates such that the percentage reduction in the quantity demanded of each commodity is the same, minimizing the total excess burden of taxation.

"To Minimize Total Excess Burden, Tax Rates Should Be Set