What is the relationship between the deadweight economic loss and tax rates
A)It does not depend on tax rates.
B)It is higher when tax rates are higher than when tax rates are lower.
C)It is lower when tax rates are higher than when tax rates are lower.
D)It does not depend on the slope of the demand curve.

Question

Quizplus · Accepted Answer

Deadweight economic loss is incurred when the tax rate is higher than the efficient level of taxation, leading to a reduction in economic activity and welfare. As tax rates increase, the deadweight loss also increases, indicating an inverse relationship between tax rates and deadweight loss.

What Is the Relationship Between the Deadweight Economic Loss and Tax