The excess burden or deadweight loss of a tax refers to the
A) increase in product price as a result of the tax.
B) growth in government funded programs as a result of the revenue generated by the tax.
C) loss of disposable income consumers suffer from the tax.
D) reduction in gains from mutually beneficial exchanges that are eliminated as a result of the tax.

Question

Quizplus · Accepted Answer

The excess burden or deadweight loss of a tax is the loss of economic efficiency that occurs when the tax distorts the market outcome, leading to a reduction in the quantity of mutually beneficial exchanges.

The Excess Burden or Deadweight Loss of a Tax Refers