Question

True or false: In some circumstances, goals such as redistributing income and reducing negative externalities, may be more important than minimizing the efficiency loss of a tax.

Answer 1

Goals such as redistributing income and reducing negative externalities may be more important than minimizing the efficiency loss of a tax, but this involves a tradeoff. While minimizing the efficiency loss of a tax is important for economic output, achieving these goals may require some level of tax distortion that could discourage work and entrepreneurship.

Step-by-step explanation:

The question asks whether goals such as redistributing income and reducing negative externalities can be more important than minimizing the efficiency loss of a tax. Goals such as redistributing income and reducing negative externalities may be more important than minimizing the efficiency loss of a tax, but this involves a tradeoff.

While minimizing the efficiency loss of a tax is important for economic output, achieving these goals may require some level of tax distortion that could discourage work and entrepreneurship. In economics, there is a tradeoff between these goals.

While minimizing the efficiency loss of a tax is important for economic output, achieving goals like income redistribution and reducing negative externalities may require some level of tax distortion. This is because heavily redistributive policies or policies aimed at reducing negative externalities may discourage work and entrepreneurship, leading to lower economic output.