Asked by Johnny Guittard on Jun 17, 2024
Verified
The size of a tax and the deadweight loss that results from the tax are
A) positively related.
B) negatively related.
C) independent of each other.
D) equal to each other.
Deadweight Loss
A shortfall in economic optimization that occurs when the balance for a good or service is missed or impossible to hit.
Tax
A compulsory financial charge or levy imposed by a government on individuals or entities to fund public expenditure.
Consumer Surplus
The difference between the aggregate willingness to pay by consumers for a good or service and the aggregate actual payment.
- Recognize the relationship between the size of a tax and its resulting deadweight loss.
Verified Answer
JA
Jenyce AmaralJun 18, 2024
Final Answer :
A
Explanation :
The size of a tax and the deadweight loss resulting from the tax are positively related because as the size of the tax increases, it distorts market behavior more, leading to greater inefficiencies and a larger deadweight loss.
Learning Objectives
- Recognize the relationship between the size of a tax and its resulting deadweight loss.