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Figure: Tax Incidence
-(Figure: Tax Incidence)Use Figure: Tax Incidence.Based on the figure,the deadweight loss of an excise tax is likely to be greater in panel _____ than in panel _____.

Question

Use the following to answer questions :
Figure: Tax Incidence 
-(Figure: Tax Incidence)Use Figure: Tax Incidence.Based on the figure,the deadweight loss of an excise tax is likely to be greater in panel _____ than in panel _____.

Quizplus · Accepted Answer

In panel c, the deadweight loss is larger as the distance between supply and demand is larger compared to panel d. In panel a, there is no deadweight loss, so it cannot be compared to either panel c or d in terms of deadweight loss. Panel b is not relevant to the comparison of deadweight loss as it shows the tax burden and not the deadweight loss. Therefore, the correct choice is A.

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