The Deadweight Loss (Or Excess Burden) Resulting from Levying a Tax

question 10

Multiple Choice

The deadweight loss (or excess burden) resulting from levying a tax on an economic activity is the

• A) tax revenue raised by the government as the result of the tax.
• B) loss of potential gains from trade from activities forgone because of the tax.
• C) increase in the price of an activity as the result of the tax levied on it.
• D) marginal benefits derived from the expansion in government activities made possible by the increase in tax revenues.

---

Definitions:

Book Value

The net value of a company's assets, subtracting the total liabilities from the total assets, often used to assess a company's financial health.

Net Present Value

This represents the discrepancy between what cash comes in at its current value and what cash goes out at its current value over an allocated period.

Market Value Per Share

The current price at which a company's stock is trading on the open market.

Equipment

Tangible assets used in operations, such as machinery or tools, which play a crucial role in the production or service process.