A Deadweight Loss Results from the Imposition of a Tax

question 75

Multiple Choice

A deadweight loss results from the imposition of a tax on a good because the tax

• A) induces the government to increase its expenditures.
• B) reduces the quantity of exchanges between buyers and sellers.
• C) causes a disequilibrium in the market.
• D) imposes a loss on buyers that is greater than the loss to sellers.

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Definitions:

Public Good

A good or service that is characterized by nonrivalry and nonexcludability. These characteristics typically imply that no private firm can break even when attempting to provide such products. As a result, they are often provided by governments, who pay for them using general tax revenues.

Government

The government refers to the system or group of people governing an organized community, often a state, setting and enforcing laws and policies.

Benefits

The advantages or profits gained from something, including financial, health, or well-being improvements.

Production

The process of creating goods and services through the combination of labor, materials, and technology.