The deadweight loss from a tax of $8 per unit will be smallest in a market with

Name: The deadweight loss from a tax of $8 per unit will be smallest in a market with
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Quizplus · Accepted Answer

Deadweight loss is smallest when both demand and supply are inelastic because inelasticity means that there are no good substitutes for the product or the inputs used to produce the product. Therefore, consumers are willing to pay more and producers are willing to produce more even with a tax, which minimizes the distortion to the market.

The Deadweight Loss from a Tax of $8 Per Unit