Asked by Cassandra Torres on Mar 10, 2024
Verified
(Figure: Tax Incidence) Use Figure: Tax Incidence.Based on the figure,the deadweight loss of an excise tax is likely to be greater in panel _____ than in panel _____.
A) D;C
B) A;B
C) C;B
D) B;A
A) D;C
B) A;B
C) C;B
D) B;A
Excise Tax
A tax applied to specific goods, services, or activities, often with the intention of reducing consumptions, such as taxes on tobacco or alcohol.
- Acquire knowledge on the fundamentals of tax efficiency and the consequences of deadweight loss within the realm of excise taxes.
Verified Answer
SS
Samantha Schechter
Mar 10, 2024
Final Answer :
B
Explanation :
The deadweight loss of an excise tax is greater in markets with more elastic demand or supply because the quantity traded is more sensitive to price changes. Panel A, with more elastic demand, would experience a greater deadweight loss compared to Panel B, where demand is less elastic.
Learning Objectives
- Acquire knowledge on the fundamentals of tax efficiency and the consequences of deadweight loss within the realm of excise taxes.