Figure 18-2 Figure 18-2 shows a demand curve and two sets of supply curves, one set more elastic than the other. -Refer to Figure 18-2. If the government imposes an excise tax of $1.00 on every unit sold A) the deadweight loss is identical under either supply curve. B) the deadweight loss is greater under the supply curve S₁. C) the deadweight loss is greater under the supply curve S₀. D) there is no deadweight loss since revenue raised is used to fund government projects.

Question

Quizplus · Accepted Answer

The deadweight loss is greater under the supply curve S₀ because the supply curve is steeper, which means that the quantity supplied decreases more in response to a tax than it would under a flatter supply curve.

Figure 18-2 Figure 18-2 Shows a Demand Curve and Two