Table 12-3

-Refer to Table 12-3.If the government imposes a $2.00 tax on Delights,causing the price to increase from $5.00 to $7.00,why does a deadweight loss arise
A)Jennifer will pay more tax as a percentage of her value of Delights than Tsering.
B)Tsering must pay the $2.00 tax from his consumer surplus.
C)Tsering will have to pay a higher price for Delights.
D)Jennifer will leave the market.

Question

Table 12-3
 
-Refer to Table 12-3.If the government imposes a $2.00 tax on Delights,causing the price to increase from $5.00 to $7.00,why does a deadweight loss arise
A)Jennifer will pay more tax as a percentage of her value of Delights than Tsering. 
B)Tsering must pay the $2.00 tax from his consumer surplus. 
C)Tsering will have to pay a higher price for Delights. 
D)Jennifer will leave the market.

Quizplus · Accepted Answer

A deadweight loss arises because Jennifer, who values Delights less than the new price, will leave the market, leading to a loss of potential trades that would have occurred without the tax.

Table 12-3 -Refer to Table 12-3.If the Government Imposes a $2.00 Tax