A commodity tax increases gains from trade.

Name: A commodity tax increases gains from trade.
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Question

Quizplus · Accepted Answer

A commodity tax increases the price that consumers pay for a good, which reduces the quantity demanded and causes a deadweight loss. This reduces gains from trade as consumers are receiving less value for their money and producers are selling less. Therefore, a commodity tax decreases gains from trade.

A Commodity Tax Increases Gains from Trade