As the tax on a good increases from $1 per unit to $2 per unit to $3 per unit and so on,

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As the tax on a good increases, the quantity demanded by consumers decreases, which results in a decrease in tax revenue. However, initially, the increase in the tax rate leads to an increase in tax revenue due to the higher tax rate applied to the original quantity demanded. As the tax rate continues to increase, the decrease in quantity demanded offsets the higher tax rate, causing tax revenue to peak and then decrease. The deadweight loss also increases as the tax rate increases since it represents the loss of mutually beneficial transactions due to the tax. However, like tax revenue, the deadweight loss will eventually peak and then decrease as the tax rate increases.

As the Tax on a Good Increases from $1 Per