Consider the market to be in equilibrium with demand curve D and supply curve S.
-Refer to the diagram above.The deadweight loss from imposing a $1 tax on sellers is
A) $0.50.
B) $1.
C) $3.
D) $4.50.
E) $7.

Question

Consider the market to be in equilibrium with demand curve D and supply curve S.
-Refer to the diagram above.The deadweight loss from imposing a $1 tax on sellers is
A) $0.50. 
B) $1. 
C) $3. 
D) $4.50. 
E) $7.

Quizplus · Accepted Answer

The deadweight loss from a tax is typically half the tax amount multiplied by the reduction in quantity sold. If the tax is $1 and the reduction in quantity is 1 unit, the deadweight loss would be $0.50.

Consider the Market to Be in Equilibrium with Demand Curve