Which of the following statements is true about taxes?

Question

Quizplus · Accepted Answer

Taxes decrease both consumer surplus and producer surplus as they increase the price paid by the consumers and decrease the price received by the producers. This results in a deadweight loss, as some transactions that would have been mutually beneficial do not occur. While the government receives revenue from the tax, it is not always greater than the loss of producer and consumer surplus. Option A is incorrect because price ceilings and price floors also create deadweight loss, but it is not necessarily greater than taxes. Option C is incorrect because the revenue from a tax may not always be greater than the loss of surplus depending on the elasticity of demand and supply for the product.

Which of the Following Statements Is True About Taxes