If a per-unit tax is imposed on producers in a market that is in equilibrium,the more inelastic demand is,the
A) smaller the deadweight loss.
B) larger the deadweight loss to producers.
C) smaller the deadweight loss to consumers.
D) larger the deadweight loss.
E) less likely the deadweight loss will be affected.

Question

Quizplus · Accepted Answer

If demand is more inelastic, consumers will continue to purchase the same quantity of the good even if the price increases due to the tax, meaning that producers can pass on the majority of the tax burden to consumers. This reduces the decrease in quantity demanded and the resulting deadweight loss.

If a Per-Unit Tax Is Imposed on Producers in a Market