Chapter 50, Problem 6MCQ

To determine

The result of a lump-sum tax on the citizens of the country

Explanation of Solution

A lumpsum tax eliminates deadweight loss because there is no substitution effect and people pay the same amount of tax regardless of their income.

Therefore, the correct option is a.

Economics Concept Introduction

Introduction:

A lumpsum tax is a regressive tax which is paid by all the taxpayers equally across the board.