The amount of deadweight loss from a tax depends upon the
A)price elasticity of demand.
B)price elasticity of supply.
C)amount of the tax per unit.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

The amount of deadweight loss from a tax depends on all three factors - price elasticity of demand, price elasticity of supply, and amount of tax per unit. The greater the price elasticities of demand and supply, the greater the deadweight loss. The amount of the tax, or tax rate, also plays a role in determining the amount of deadweight loss, as higher tax rates generally lead to greater inefficiencies in the market. Therefore, all of the above factors are correct answers.

The Amount of Deadweight Loss from a Tax Depends Upon