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Taxing a Good with Very Elastic Demand Generates More Deadweight

Question 128

Multiple Choice

Taxing a good with very elastic demand generates more deadweight loss than taxing a good with very inelastic demand because


A) the amount of the tax is larger.
B) the change in consumer behavior is greater.
C) consumers have to pay these taxes out of pocket.
D) the change in consumer behavior is smaller.
E) the government does not bother collecting the revenue.

Correct Answer:

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