According to economists, an efficient tax is one that
A. is relatively easy to collect relative to the revenue it generates.
B. maximizes tax revenue for government.
C. imposes a small excess burden relative to the tax revenue it raises.
D. splits the tax burden equally between consumers and producers.
Answer (2)
An efficient tax is one that imposes a small excess burden relative to the tax revenue it raises, thus minimizing economic distortion. While ease of collection and revenue maximization are important, they do not define efficiency. The key focus is on balancing the burden and the revenue generated. ;
The correct answer is C: an efficient tax is one that imposes a small excess burden relative to the tax revenue it raises. This type of tax efficiently balances the need for revenue with minimal impact on economic behavior. Characteristics of efficient taxes include minimal economic distortion and ease of collection, but not necessarily equal burden distribution among consumers and producers.
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