If the government wishes to maximize its tax revenue, it should
A) recognize that too high of a tax rate can decrease the tax base.
B) engage in static tax analysis.
C) recognize that an increase in the tax rate will lead to an increase in tax revenues.
D) use only flat taxes.
Question 2
If the production of ukuleles creates a negative externality that is not corrected for by the government, the equilibrium quantity of ukuleles is
A) higher than optimal.
B) lower than optimal.
C) efficient.
D) at a optimal level.
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