Asked by
Kimberlly Correia
on Dec 11, 2024Verified
The excess burden or deadweight loss of a tax refers to the
A) increase in product price as a result of the tax.
B) growth in government funded programs as a result of the revenue generated by the tax.
C) loss of disposable income consumers suffer from the tax.
D) reduction in gains from mutually beneficial exchanges that are eliminated as a result of the tax.
Excess Burden
Refers to the cost to society created by market inefficiency, which occurs when supply and demand are out of equilibrium.
Deadweight Loss
A loss of economic efficiency that can occur when the free market equilibrium for a good or a service is not achieved, leading to a net loss in total surplus.
Mutual Exchanges
A process where parties agree to transfer goods, services, or other items of value with each other.
- Examine the impact of excise taxes on products with varying demand elasticity and understand the notion of deadweight loss.
Verified Answer
JA
Learning Objectives
- Examine the impact of excise taxes on products with varying demand elasticity and understand the notion of deadweight loss.