The deadweight loss from a tax
A)does not vary in amount when the price elasticity of demand changes.
B)does not vary in amount when the amount of the tax per unit changes.
C)is larger,the larger is the amount of the tax per unit.
D)is smaller,the larger is the amount of the tax per unit.

Question

Quizplus · Accepted Answer

The deadweight loss from a tax increases with the amount of the tax per unit. This is because as the tax increases, the price of the good also increases, leading to a decrease in quantity demanded. The larger the decrease in quantity demanded, the larger the deadweight loss. Therefore, option C is the correct answer. Options A and B are incorrect because the deadweight loss does vary with changes in price elasticity and the amount of tax per unit. Option D is incorrect because a larger tax per unit leads to a larger deadweight loss, not a smaller one.

The Deadweight Loss from a Tax