Asked by Xandrei Lugay on Jun 16, 2024
Verified
Taxes create deadweight losses.
Deadweight Losses
A loss of economic efficiency that can occur when the equilibrium for a good or service is not achieved or is not achievable.
- Acquire knowledge on the notion of deadweight loss and the role of taxes in its creation.
Verified Answer
PM
Pavel MakarevichJun 19, 2024
Final Answer :
True
Explanation :
Taxes cause deadweight losses because they prevent buyers and sellers from realizing some of the gains from trade. In other words, they reduce the overall size of the market and the economic welfare of both parties, leading to inefficiencies in the market.
Learning Objectives
- Acquire knowledge on the notion of deadweight loss and the role of taxes in its creation.