Suppose a tax of $5 per unit is imposed on a good, and the tax causes the equilibrium quantity of the good to decrease from 200 units to 100 units. The tax decreases consumer surplus by $450 and decreases producer surplus by $300. The deadweight loss from the tax is:
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Taxation: incidence and efficiency has come up 79 times in 7 exams since 2009.
This question is on Excess burden and deadweight loss of taxation, part of Taxation: incidence and efficiency in Public Economics.
The efficiency cost of a tax beyond the revenue it raises.
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Question from the JNU SSS 2019 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.