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
A)the deadweight loss is identical under either supply curve.
B)the deadweight loss is greater under the supply curve S1.
C)the deadweight loss is greater under the supply curve S0.
D)there is no deadweight loss since 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
A)the deadweight loss is identical under either supply curve. 
B)the deadweight loss is greater under the supply curve S1. 
C)the deadweight loss is greater under the supply curve S0. 
D)there is no deadweight loss since revenue raised is used to fund government projects.

Quizplus · Accepted Answer

The deadweight loss is greater under the supply curve S0 because the tax causes the quantity supplied to decrease more than it does under the supply curve S1.

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