Suppose the tax on gasoline is raised from $0.50 per gallon to $2.50 per gallon.As a result,

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Quizplus · Accepted Answer

The deadweight loss of the tax necessarily increases because a higher tax leads to a greater distortion in the market, reducing the quantity of gasoline traded and creating a larger efficiency loss. However, tax revenue does not necessarily increase as it depends on the elasticity of demand and supply, and the supply curve does not become steeper due to a tax change.

Suppose the Tax on Gasoline Is Raised from $0