When do taxes create deadweight loss
A)when they distort behaviour
B)when they cause the price of the product to increase
C)when they don't raise sufficient government revenue
D)when they cannot be computed easily

Question

Quizplus · Accepted Answer

Deadweight loss occurs when taxes distort behavior and cause a market to become inefficient, resulting in a loss of overall welfare that exceeds the revenue raised by the tax. This can happen when taxes create disincentives for individuals or businesses to engage in certain activities, such as working or producing certain goods. Choices B and C may result from taxes, but they alone do not create deadweight loss. Choice D is not directly related to deadweight loss, although it may make it more difficult to impose and collect taxes.

When Do Taxes Create Deadweight Loss