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:

Ego

According to Freud, the psychological force that employs reason and operates in accordance with the reality principle.

Fixation

In psychoanalytic theory, an obsessive focus or attachment to a stage of development, object, or person.

Defense Mechanism

Psychological strategies brought into play by individuals to protect themselves from unacceptable thoughts or feelings.

Rationalization

A defense mechanism in which controversial behaviors or feelings are justified and explained in a seemingly rational or logical manner to avoid the true explanation.