For a Tax on a Good, the Deadweight Loss Is

question 80

Multiple Choice

For a tax on a good, the deadweight loss is small when price elasticity of demand is low because of

• A)a large difference between the efficient quantity of demand and the quantity demanded with the tax.
• B)a small difference between the efficient quantity of demand and the quantity demanded with the tax.
• C)a large difference between the efficient quantity of demand and the efficient quantity of supply.
• D)a small difference between the efficient quantity of demand and the efficient quantity of supply.
• E)a small difference between the efficient quantity of supply and the quantity supplied with the tax.

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Definitions:

Contagion

The spread of economic or financial crises from one market or region to another, often accelerated by panic selling and loss of confidence.

Banking System

A network of institutions that provide financial services, including managing deposits, loans, and currency exchange.

Exchange Rate

The price of one country's currency expressed in another country's currency, allowing for the exchange of currencies in global markets.

Own Currency

The currency issued and used by a country, typically managed by its central bank or monetary authority.