QUESTION 3
Which of the following statements correctly describes the relationship between the size of the dead weight loss, (DWL), and the amount of
tax revenue as the size of the tax rate increases from a small tax rate to a medium rate to a large tax?
a. Both the size of the DWL and tax revenue increase.
b. The size of the DWL increases, but tax revenue decreases.
c. The size of the DWL increases, but tax revenue first increases, then decreases.
d. Both the size of the DWL and tax revenue decrease.