Figure 18-2 shows a demand curve and two sets of supply curves,one set more elastic than the other.
-Refer to Figure 18-2.If the government imposes an excise tax of $1.00 on every unit sold,what is the size of the deadweight loss,if there is any?
A)the area adc if the supply curve is S0 and the area bec if the supply curve is S1.
B)the area afcd if the supply curve is S0 and the area bfce if the supply curve is S1.
C)the area becf under either supply curve.
D)There is no deadweight loss;revenue raised is used to fund government projects.

Question

Figure 18-2 shows a demand curve and two sets of supply curves,one set more elastic than the other.
-Refer to Figure 18-2.If the government imposes an excise tax of $1.00 on every unit sold,what is the size of the deadweight loss,if there is any?
A)the area adc if the supply curve is S0 and the area bec if the supply curve is S1. 
B)the area afcd if the supply curve is S0 and the area bfce if the supply curve is S1. 
C)the area becf under either supply curve. 
D)There is no deadweight loss;revenue raised is used to fund government projects.

Quizplus · Accepted Answer

The deadweight loss from a tax is the loss of economic efficiency when the equilibrium outcome is not achievable due to the tax. It is represented by the area between the supply and demand curves that is not realized due to the tax, which is adc for S0 and bec for S1.

Figure 18-2 Shows a Demand Curve and Two Sets of Supply