The government is deciding where to put a $1 tax-either in a market with elastic supply and demand curves,or a market with inelastic supply and demand curves.If their aim is to raise the most revenue with the smallest deadweight loss,where should the tax be placed?

Question

Quizplus · Accepted Answer

A tax placed in a market with inelastic supply and demand curves will raise more revenue with a smaller deadweight loss because the quantity traded does not decrease significantly, leading to higher tax revenue and minimal efficiency loss.

The Government Is Deciding Where to Put a $1 Tax-Either