What does a deadweight loss from taxes in a market represent
A)the inefficiency that taxes create
B)the shift in benefit from producers to consumers
C)the part of consumer and producer surplus that is now revenue to the government
D)the loss in profit to producers when quantity demanded falls as a result of higher prices

Question

Quizplus · Accepted Answer

A deadweight loss from taxes represents the inefficiency that taxes create in the market because it shows the loss in economic activity and welfare caused by taxes that go beyond the revenue collected by the government. This loss happens when taxes change the incentives of consumers and producers and cause them to alter their behavior in ways that reduce the quantity exchanged and the total value of transactions. Deadweight loss reflects a loss of social welfare that arises from a market distortion, not a transfer of surplus from one group to another, as in the case of consumer and producer surplus that can be taxed as revenue.

What Does a Deadweight Loss from Taxes in a Market