Suppose the government considers placing a tax on business profits o that businesses decrease their production and generate a deadweight loss. Revenues from the tax would be used to boost the incomes of the poor. The decision to levy the tax implies that in this case, the government
A) values people but not business.
B) values efficiency more than its view of fairness.
C) profits from taxes.
D) values its view of fairness more than efficiency.

Question

Quizplus · Accepted Answer

The government is prioritizing its view of fairness by using tax revenues to boost the incomes of the poor, even though it may lead to a decrease in production and a deadweight loss, which indicates a sacrifice of efficiency.

Suppose the Government Considers Placing a Tax on Business Profits