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Imagine that a state with a sales tax of 4% decides to reduce that tax rate to 2%. What would the result be on the

Imagine that a state with a sales tax of 4% decides to reduce that tax rate to 2%. What would the result be on the magnitude of the excess burden (deadweight loss) under the tax?

a.

The excess burden will increase by 25%

b.

The excess burden will increase by 75%

c.

The excess burden will decrease by 75%

d.

The excess burden will decrease by 25%

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