Taxes Create Deadweight Losses Because They

question 254

Multiple Choice

Taxes create deadweight losses because they

• A) reduce profits of firms.
• B) distort incentives.
• C) cause prices to rise.
• D) create revenue for the government.

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Definitions:

Pure Monopolist

A single seller in a market with no close substitutes for the product, giving the seller significant control over prices.

Maximum Profit

The highest possible financial gain a business can achieve from its operations, given its costs and revenue structure.

Minimum Loss

The lowest possible amount of financial detriment that a business or individual can incur under given circumstances.

Rent-seeking

An economic concept describing the practice of gaining wealth without any contribution to productivity, typically by manipulating the social or political environment.