Asked by Amanda Sammons on Jul 12, 2024
Verified
The deadweight loss of a tax rises even more rapidly than the size of the tax.
Deadweight Loss
A loss of economic efficiency that can occur when equilibrium for a good or service is not achieved or is not achievable.
Tax
Mandatory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization.
- Learn about the concept of deadweight loss induced by taxation and its consequences for market efficiency.
- Perceive the relationship tying the size of a tax, the revenue it generates, and the resulting deadweight loss.
Verified Answer
KM
Keirstyn Mondile
Jul 17, 2024
Final Answer :
True
Explanation :
The deadweight loss of a tax increases with the square of the size of the tax, meaning it rises more rapidly than the tax itself due to the reduction in the quantity of the good being bought and sold.
Learning Objectives
- Learn about the concept of deadweight loss induced by taxation and its consequences for market efficiency.
- Perceive the relationship tying the size of a tax, the revenue it generates, and the resulting deadweight loss.