Question

As a tax rate grows larger and larger, eventually Select one: a. deadweight loss can outweigh tax revenue. b. supply can outweigh demand. c. tax revenue can outweigh willingness to sell. d. demand can outweigh supply.

Answer 1

As a tax rate grows larger and larger deadweight loss can outweigh tax revenue.

What is the impact of a large tax rate?

The impact of a high tax rate can be examined by examining the Laffer curve. The Laffer Curve is a supply side economic theory that depicts the relationship between tax rates and tax revenue. According to the Laffer curve, after a point is reached, higher tax rates results in lower tax revenues.

This is because after tax rate exceed a certain point, workers would be discouraged from working and would stop earning an income due to the high tax that workers would pay. This would reduce the source of tax revenue.

To learn more about the Laffer curve, please check: https://brainly.com/question/25558844

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