A. Consider varying degrees of inefficiency in the nation’s tax system.

a. In our development of the concept of deadweight loss from taxation, we found that the deadweight loss from taxes tends to increase at a rate k 2

for a k-fold increase in the tax rate.

Define the “social marginal cost of funds” SMCF as the marginal cost society incurs from each additional dollar spent by the government. What is the shape of the SMCF curve?