Which of the Following Can Create Inefficiency and Deadweight Loss

question 99

Multiple Choice

Which of the following can create inefficiency and deadweight loss?

• A) Moral hazard can create inefficiency and deadweight loss but adverse selection cannot.
• B) Adverse selection can create inefficiency and deadweight loss but moral hazard cannot.
• C) Both moral hazard and adverse selection can create inefficiency and deadweight loss.
• D) Neither moral hazard nor adverse selection can create inefficiency and deadweight loss.
• E) None of the above answers is correct because whether inefficiency and deadweight loss are created depends on whether the moral hazard and adverse selection affect demanders or suppliers.

---

Definitions:

Payroll Tax Liability

The obligation of an employer to withhold and pay taxes to the government based on the wages and salaries paid to employees.

Form 941-V

A specific tax form used when making a payment together with Form 941, which is the Employer's Quarterly Federal Tax Return.

Payroll Tax Withholding

The process by which employers deduct taxes from employees' paychecks to cover income taxes, Social Security, and Medicare obligations.

Monthly Schedule Depositors

Taxpayers who are required to deposit certain types of taxes on a monthly basis.