If the Tax on a Good Is Increased from $0

question 334

Multiple Choice

If the tax on a good is increased from $0.10 per unit to $0.40 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:

Discount

A reduction from the usual cost of something, often used to encourage sales or provided as an incentive for early payment.

Direct Quote

A monetary exchange rate where the domestic currency is quoted per each unit of a currency from another country.

Canadian Dollar

The currency of Canada, symbolized as CAD and often represented by the dollar sign $ or C$ to differentiate it from other dollar-denominated currencies.

Political Risk

The potential for losses or other adverse impacts on business activities due to political changes or instability in a country.