The deadweight economic loss from taxes:
A)does not depend on tax rates
B)is higher when tax rates are higher than when tax rates are lower
C)is lower when tax rates are higher than when tax rates are lower
D)does not depend on the slope of the demand curve

Question

Quizplus · Accepted Answer

The deadweight economic loss from taxes increases as tax rates increase because higher tax rates lead to a greater reduction in the quantity of goods or services demanded. This reduction in demand causes a distortion in the market, resulting in inefficiency and deadweight loss. Therefore, higher tax rates result in a higher deadweight economic loss from taxes.

The Deadweight Economic Loss from Taxes