Asked by Jiwanjot Singh on May 19, 2024
Verified
The deadweight loss associated with a tax on a commodity is generated by
A) the consumers who still choose to consume the commodity but pay a higher price that reflects the tax.
B) the consumers who choose to not consume the commodity that is taxed.
C) all citizens who are able to use services provided by government.
D) the consumers who are unable to avoid paying the tax.
Deadweight Loss
A loss in economic efficiency that can occur when the equilibrium for a good or service is not achieved or is unattainable.
Commodity
A basic good used in commerce that is interchangeable with other goods of the same type.
Tax
a financial charge or other levy imposed upon a taxpayer by a governmental organization in order to fund public expenditures.
- Gain insight into the relationship between taxes, consumer surplus, and the occurrence of deadweight loss.
Verified Answer
DS
Daniel SwindellMay 25, 2024
Final Answer :
B
Explanation :
The deadweight loss associated with a tax on a commodity is generated by the reduction in the quantity of the commodity consumed. This occurs because some consumers choose not to consume the commodity due to the higher price resulting from the tax, leading to a loss of economic efficiency.
Learning Objectives
- Gain insight into the relationship between taxes, consumer surplus, and the occurrence of deadweight loss.