When the size of a tax is doubled,what happens to the deadweight loss from the tax
A)It increases by the size of the tax.
B)It doubles.
C)It remains constant.
D)It increases by a factor of four.

Question

Quizplus · Accepted Answer

The deadweight loss from a tax is directly proportional to the size of the tax and the square of the elasticity of demand or supply. When the size of the tax is doubled, the deadweight loss increases by a factor of four (2^2). Therefore, the correct answer is D.

When the Size of a Tax Is Doubled,what Happens to the Deadweight