A per unit tax in a competitive market with demand elasticity less than zero:
A)never creates dead weight loss.
B)decreases the equilibrium price.
C)always creates dead weight loss.
D)sometimes creates dead weight loss.

Question

Quizplus · Accepted Answer

A per unit tax in a competitive market typically leads to a deadweight loss because it causes the quantity sold to decrease from the efficient market equilibrium, where supply equals demand. This inefficiency arises regardless of the demand elasticity, as long as it is not perfectly inelastic.

A Per Unit Tax in a Competitive Market with Demand