Discuss this proposal would increase or decrease efficiency

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Question: 1. In 2005, Michigan considered cutting the general sales tax (a tax on most goods at the same rata) and replacing it with a tax on a few products. Such as insurance policies. Using Equation. discuss whether this proposal would increase or decrease efficiency.

- ½ηP_b^t^₂_b

2. In the formula for excess burden given in Equation, the tax is less than one. When it is squared, the result is smaller, not bigger. Thus, having rot instead of t In the formula makes the tax less important" Comment.

Reference no: EM131490550

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