What does the deadweight loss of taxation measure
A)the loss in benefit to buyers and sellers in a market due to the tax
B)the loss in revenue to the government when buyers choose to buy less of the product
C)the loss of efficiency in a market as a result of government intervention
D)the lost revenue to businesses because of higher prices to consumers from the tax

Question

Quizplus · Accepted Answer

The deadweight loss of taxation measures the loss in benefit to buyers and sellers in a market due to the tax. This loss occurs because the tax changes the price that buyers pay and the price that sellers receive, leading to a decrease in the quantity of the product exchanged. Buyers and sellers both lose the benefits they would have received if the tax did not exist, leading to a reduction in overall welfare.

What Does the Deadweight Loss of Taxation Measure