Asked by amirhossein jafarikermanshahi on May 19, 2024
Verified
A lump-sum tax does not produce a deadweight loss.
Lump-Sum Tax
A tax that is a fixed amount, not dependent on the taxpayer's income level or economic transactions.
Deadweight Loss
A loss of economic efficiency that occurs when the equilibrium for a good or service is not achieved or is achievable but is not achieved.
- Explain the impact of taxes on economic efficiency and deadweight loss.
Verified Answer
MS
Michelle Sanchez
May 19, 2024
Final Answer :
True
Explanation :
A lump-sum tax is considered non-distortionary because it does not affect economic decisions or behaviors, thus it does not create a deadweight loss, unlike taxes that distort prices and incentives.
Learning Objectives
- Explain the impact of taxes on economic efficiency and deadweight loss.