The following figure shows the supply and demand curves in a competitive market for a good. The government is considering a $1.50 tax on this good.

-Refer to the figure above.If the $1.50 tax is collected from the producers of this good,the deadweight loss of this taxation will be ________.

Question

The following figure shows the supply and demand curves in a competitive market for a good. The government is considering a $1.50 tax on this good.
 
-Refer to the figure above.If the $1.50 tax is collected from the producers of this good,the deadweight loss of this taxation will be ________.

Quizplus · Accepted Answer

The deadweight loss of taxation is represented by the reduction in the quantity of transactions below the level that would occur in a free market, due to the imposition of the tax. This loss is typically illustrated as a triangle in the supply and demand diagram, where the base of the triangle is the reduction in quantity sold due to the tax, and the height is the tax itself. The area of this triangle represents the efficiency loss or the deadweight loss. Without seeing the specific figure, the general principle is that the deadweight loss occurs because the tax causes the market to not reach its most efficient point, where supply equals demand. The correct answer, therefore, depends on understanding this concept rather than the specific values provided in the choices, which cannot be directly verified without the figure. However, assuming a standard supply and demand curve, a tax would typically create a deadweight loss by reducing the quantity traded below the equilibrium level.

The Following Figure Shows the Supply and Demand Curves in a Competitive