The excess burden of an excise tax
A)is the price the consumer must pay above the free-market price.
B)reflects the allocative efficiency of the tax.
C)is the deadweight loss created by the tax.
D)is the administrative cost of collecting the tax.
E)is the total cost imposed on the producer by the tax.

Question

Quizplus · Accepted Answer

The excess burden of an excise tax, also known as deadweight loss, is the loss of consumer and producer surplus that results from the tax and reflects the inefficiency and economic distortions created by the tax. It is the reduction in net social welfare that results from the tax and represents a loss to society that is greater than the revenue raised by the government.

The Excess Burden of an Excise Tax