One way to minimize the deadweight loss resulting from a specific tax is to
A)tax only wealthy firms and individuals.
B)spread the tax over many goods and services.
C)tax goods for which either supply or demand is inelastic.
D)tax luxury items such as yachts and sports cars.

Question

Quizplus · Accepted Answer

Taxing goods with inelastic demand or supply means that consumers or producers are less responsive to changes in the price of the good due to the tax, resulting in a smaller deadweight loss. This is because they are unlikely to change their behavior (reduce consumption or production) in response to the tax, and thus the market will not be as distorted.

One Way to Minimize the Deadweight Loss Resulting from a Specific