Use the Ramsey Rule to compare two alternative tax policies. First, suppose that we apply two small

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Use the Ramsey Rule to compare two alternative tax policies. First, suppose that we apply two small taxes applied at the rate t to a commodity. Second, suppose that we apply one tax at the rate 2t applied to the same commodity.
a. What are the efficiency effects of the two policy options?
b. Is there reason to prefer one policy to the other on efficiency grounds? Explain.
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Public Finance

ISBN: 978-1111526986

2nd edition

Authors: John E. Anderson

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