In general, the deadweight loss associated with an import tariff or quota becomes relatively larger when:
A) supply and demand are inelastic.
B) supply is elastic and demand is inelastic.
C) demand is elastic and supply is inelastic.
D) supply and demand are elastic.

Question

Quizplus · Accepted Answer

When both supply and demand are elastic, consumers and producers are more responsive to price changes, leading to a larger deadweight loss from tariffs or quotas as these policies significantly distort market equilibrium.

In General, the Deadweight Loss Associated with an Import Tariff