The demerit goods should be taxed at
A. Higher rate
B. Lower rate
C. Tax free
D. Subsidised
Answer:A
The demerit goods should be taxed at
A. Higher rate B. Lower rate C. Tax free D. Subsidised
Explanation: The demerit goods should be taxed at high rate while in case of merit goods, tax should be at lower rate. Goods that account for a large share of expenditures of poorer households, such as food, will typically be merit goods, and should therefore be taxed at low rates, made exempt from taxation, or even subsidized.