Figure 8-18

-Refer to Figure 8-18.Which graph correctly illustrates the relationship between the size of a tax and the size of the deadweight loss associated with the tax?

Question

Figure 8-18

-Refer to Figure 8-18.Which graph correctly illustrates the relationship between the size of a tax and the size of the deadweight loss associated with the tax?

Quizplus · Accepted Answer

Panel (a) correctly illustrates the relationship between the size of a tax and the size of the deadweight loss associated with the tax. As the size of the tax increases, the size of the deadweight loss also increases. This is because a larger tax creates a larger wedge between the price that consumers are willing to pay for a good and the price that producers are willing to accept, which leads to a decrease in the quantity of the good that is bought and sold.

Figure 8-18 -Refer to Figure 8-18.Which Graph Correctly Illustrates the Relationship Between