If a Tax Did Not Induce Buyers or Sellers to Change

question 185

True/False

If a tax did not induce buyers or sellers to change their behavior, it would not cause a deadweight loss.

---

Definitions:

Current Income

The total amount of money earned within a specific time period, including wages, dividends, and interest.

Clientele Effect

The theory suggesting that changes in dividend policy will attract a different class of shareholders or cause the current shareholders to sell their shares.

Residual Dividend Theory

The idea that corporations pay dividends with whatever money is left over out of earnings after all projects with a positive NPV are undertaken.

Signaling Effect

The idea that actions taken by a company can provide information to the market or signal the company’s future prospects, potentially affecting its stock price.