Asked by Suzanna Mondragon on May 26, 2024
Verified
When a tax is imposed, the loss of consumer surplus and producer surplus as a result of the tax exceeds the tax revenue collected by the government.
Consumer Surplus
The difference between what consumers are willing to pay for a good or service relative to its market price, representing the benefit to consumers from participating in the market.
Producer Surplus
The deviation between the selling price producers are content with for a good or service and what they ultimately receive.
Tax Revenue
The income that is collected by governments through the imposition of taxes on various activities, transactions, income, and property.
- Understand the concept of deadweight loss and how taxes contribute to it.
- Evaluate the significance of tax proceeds from the government in fostering public welfare and market prosperity.
Verified Answer
SG
Shaunee GonzalesMay 28, 2024
Final Answer :
True
Explanation :
This phenomenon is known as deadweight loss, which occurs because the tax discourages transactions that would have otherwise happened in the absence of the tax, leading to a reduction in overall economic efficiency and a loss that exceeds the tax revenue collected.
Learning Objectives
- Understand the concept of deadweight loss and how taxes contribute to it.
- Evaluate the significance of tax proceeds from the government in fostering public welfare and market prosperity.