If the Size of a Tax Triples, the Deadweight Loss

question 62

True/False

If the size of a tax triples, the deadweight loss increases by a factor of six.

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Definitions:

Shut-down Decision

The choice made by a firm about temporarily or permanently ceasing operations, often because operating costs exceed revenues at the current market price.

Short-run

A timeframe in economics during which at least one factor of production is fixed and cannot be changed.

MC

is an abbreviation for Marginal Cost, which represents the change in total cost that arises when the quantity produced is incremented by one unit.

ATC

Average Total Cost is determined by dividing the total production expense by the output quantity.