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10. The deadweight loss of a tax is
| A) | the reduction in economic welfare of taxpayers that exceeds the revenue raised by the government. |
| B) | the improved efficiency created as people reallocate resources according to the tax incentive rather than the true costs and benefits. |
| C) | the loss in tax revenues. |
| D) | Both a and b are correct. |
11. A value-added tax or VAT is a tax on
| A) | retail purchases only. |
| B) | wholesale purchases only. |
| D) | all stages of production of a good. |
12. A person's marginal tax rate equals
| A) | her tax obligation divided by her average tax rate. |
| B) | the increase in taxes she would pay as a percentage of the rise in her income. |
| C) | her tax obligation divided by her income. |
| D) | the increase in taxes if her average tax rate were to rise by 1percent. |
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