Suppose a Tax of $0

question 59

Multiple Choice

Suppose a tax of $0.10 per unit on a good creates a deadweight loss of $100.If the tax is increased to $0.25 per unit,the deadweight loss from the new tax would be

• A)$200.
• B)$250.
• C)$475.
• D)$625.

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Definitions:

Producer Surplus

The difference between what producers are willing to accept for a good or service versus what they actually receive, due to market prices.

Total Surplus

The aggregate benefit to society, constituted by the addition of consumer and producer surplus, derived from the creation and utilization of goods and services.

Total Surplus

The aggregate of producer surplus and consumer surplus, symbolizing the complete net advantage to society through the consumption and manufacture of goods and services.

Auction

A public sale in which goods or services are sold to the highest bidder.