When a tax is imposed on a good,what do we know about the losses to buyers and sellers
A)They are equal to the revenue raised by the government.
B)They are less than the revenue raised by the government.
C)They exceed the revenue raised by the government.
D)They cannot be compared to the tax revenue raised by the government since the amount of the tax will vary from good to good.

Question

Quizplus · Accepted Answer

When a tax is imposed on a good, it leads to an increase in the price of the good for buyers and a decrease in revenue for sellers. The combined loss to buyers and sellers is known as the deadweight loss. This deadweight loss can be represented by the area between the supply and demand curve up to the point of the tax. This loss exceeds the amount of revenue raised by the government through the tax. Therefore, option C is correct. Options A and B are incorrect because the losses are higher than or less than the revenue raised, respectively. Option D is also incorrect because the amount of tax is not relevant to the question.

When a Tax Is Imposed on a Good,what Do We