If the Tax on a Good Is Increased from $0

question 403

Multiple Choice

If the tax on a good is increased from $0.15 per unit to $0.60 per unit,the deadweight loss from the tax

• A) remains constant.
• B) increases by a factor of 4.
• C) increases by a factor of 9.
• D) increases by a factor of 16.

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Definitions:

Accounting Scandal

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WorldCom

A telecommunications company that was involved in one of the largest accounting fraud scandals in history, leading to its bankruptcy in 2002.

Volcker Rule

Part of the Dodd-Frank Wall Street Reform and Consumer Protection Act that restricts U.S. banks from making certain kinds of speculative investments that do not benefit their customers.