When a single tax is imposed,the excess burden is proportional to the compensated elasticity of demand and to the square of the tax rate.
A) True
B) False
C) Uncertain

Question

Quizplus · Accepted Answer

This statement is known as the "Second Welfare Theorem" and is widely accepted in economic theory. It states that the excess burden (or deadweight loss) of a tax is directly related to the elasticity of demand and the square of the tax rate.

When a Single Tax Is Imposed,the Excess Burden Is Proportional