Suppose a tax is imposed on buyers in the market shown in the graph. What area(s) will represent deadweight loss?

Question

Quizplus · Accepted Answer

Deadweight loss occurs when the tax leads to a reduction in transactions, represented by the triangle formed by the points where the supply and demand curves intersect with the tax-inclusive price. In this case, that would be D + H. The other areas (E, K, I + M) do not represent deadweight loss.

Suppose a Tax Is Imposed on Buyers in the Market