Question

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.

Answer 1

C. is larger, the larger is the amount of the tax per unit.

Step-by-step explanation:

Deadweight loss of a tax is the harm caused by taxation on economic efficiency and productivity. It talks about the degree to which taxation reduces the standard of living of tax payers. Now, the larger the deadweight loss of tax, the larger the tax per unit. Tax deadweight loss occurs because taxes reduces the purchasing power of individuals. When there's no equilibrium in supply and demand, deadweight loss occurs.