A Deadweight Loss Is a Consequence of a Tax on a Good

question 11

Multiple Choice

A deadweight loss is a consequence of a tax on a good because the tax

• A)induces the government to increase its expenditures.
• B)induces buyers to consume less,and sellers to produce less.
• C)increases the equilibrium price in the market.
• D)imposes a loss on buyers that is greater than the loss to sellers.

---

Definitions:

Zero-Coupon Bond

A bond paying no coupons that sells at a discount and provides only payment of face value at maturity.

Discount Rate

The interest rate used to discount future cash flows to their present values, often used in investment appraisal and risk assessment.

Duration

The measure of the sensitivity of the price of a bond or other debt instrument to changes in interest rates, often expressed in years.

Coupon Bond

A type of bond that pays the holder interest payments at fixed intervals (usually annually or semi-annually) until the bond matures, at which point the principal amount is repaid.