A $0.30 per unit tax is imposed on a good that reduces the quantity supplied and demanded by 1000 units.What is the deadweight loss (ignore price elasticities)?

Question

Quizplus · Accepted Answer

Without information on price elasticities, we cannot determine the exact deadweight loss. However, we do know that both the quantity supplied and demanded decrease by the same amount (1000 units). This means that the tax is efficient and there is no additional deadweight loss from excess burden. The deadweight loss is simply the area of the triangle formed by the tax and the new quantity traded, which can be calculated as 0.5 x 0.30 x 1000 = $150. Therefore, the best choice is C.

A $030 Per Unit Tax Is Imposed on a Good That