If the tax rate for any good is doubled, deadweight loss of the tax will roughly:
The deadweight loss will roughly quadruple. In the standard small-tax approximation, deadweight loss is proportional to the square of the tax rate, so doubling the rate…
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If the tax rate for any good is doubled, deadweight loss of the tax will roughly:
Answer and explanation
Correct answer A
The deadweight loss will roughly quadruple. In the standard small-tax approximation, deadweight loss is proportional to the square of the tax rate, so doubling the rate multiplies the loss by .
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West Bengal SET (WB SET)