Exhibit 7-9
-Refer to Exhibit 7-9. Deadweight loss occurs because:

Question

​Exhibit 7-9 
-Refer to Exhibit 7-9. Deadweight loss occurs because:​

Quizplus · Accepted Answer

Deadweight loss occurs because the tax reduces the quantity exchanged below the original output level. In the given exhibit, the original output level was Q0 but the quantity exchanged after the tax is Q2. This difference between Q0 and Q2 is the deadweight loss. Option A is incorrect as the price to buyers is lower but it is not the cause of the deadweight loss. Option B is incorrect as an increase in quantity exchanged is not the cause of deadweight loss. Option D is incorrect as an increase in surplus means there is no deadweight loss.

​Exhibit 7-9 -Refer to Exhibit 7-9. Deadweight Loss Occurs Because:​

Exhibit 7-9 -Refer to Exhibit 7-9. Deadweight Loss Occurs Because: