Question

In: Economics

If demand is elastic, the tax burden falls primarily on the _____ and deadweight loss is...

If demand is elastic, the tax burden falls primarily on the _____ and deadweight loss is _____.

A. seller; small

B. buyer; large

C. seller; large

D. buyer; small

(D is wrong, tried it)

Solutions

Expert Solution

If demand is elastic, then what happens is that even a bit price change can reduce the quantity demanded to a great extent as a result of which if there is a tax, then the seller would be responsible for most of it because he would try not to change the price as much as possible so that the demand is in check and the more elastic the demand is, the more deadweight loss it would be there all in all.

Therefore (B) is the answer to this question

Rahul Sunny answered 2 years ago
Next > < Previous

Related Solutions

What is a deadweight loss? What is tax incidence?
What is a deadweight loss? What is tax incidence? What is the impact of a tax imposed on a commodity when demand is inelastic and supply is elastic? Who bares the burden of the tax - consumers and/or producers? Explain the relevance of a Laffer curve and supply side economics?
A given tax will impose a greater deadweight loss when: both supply and demand are inelastic....
A given tax will impose a greater deadweight loss when: both supply and demand are inelastic. both supply and demand are elastic. supply is elastic and demand is inelastic. supply is inelastic and demand is elastic. In the market for good X—a necessity good without any good substitutes—the workers and capital in the industry can easily find work producing other goods. The burden of the tax is likely to fall: evenly between buyers and sellers. more heavily on sellers, given...
How does the deadweight loss of a tax increase relative to the tax revenue from the...
How does the deadweight loss of a tax increase relative to the tax revenue from the tax as the size of the tax increases?
A tax on the sale of a good results in (i) a deadweight loss and (ii)...
A tax on the sale of a good results in (i) a deadweight loss and (ii) the burden of the tax being shared equally between the buyer and the seller. True or false? Explain and illustrate your answers.
What is not likely a source of deadweight loss? a) A payroll tax. b) A legislated...
What is not likely a source of deadweight loss? a) A payroll tax. b) A legislated minimum wage. c) A non-competitive labor market. d) An unemployment person who is willing to work at the market rate. e) Employer-provided health care insurance.
3. Relationship between tax revenues, deadweight loss, and demandelasticity The government is considering levying a tax...
3. Relationship between tax revenues, deadweight loss, and demandelasticity The government is considering levying a tax of $100 per unit on suppliers of either leather jackets or smartphones. The supply curve for each of these two goods is identical, as you can see on each of the following graphs. The demand for leather jackets is shown by DLDL (on the first graph), and the demand for smartphones is shown by DSDS (on the second graph). Suppose the government taxes leather...
Graph and explain deadweight loss
Graph and explain deadweight loss
Graph and explain deadweight loss
Graph and explain deadweight loss
Monopoly Deadweight Loss and Elasticity The demand and cost information for a patented drug developed and...
Monopoly Deadweight Loss and Elasticity The demand and cost information for a patented drug developed and sold by the monopolist BigPharma are given below: Demand: P = 80 – 6Q Total cost: TC = 2Q2 Marginal Cost: MC = 4Q, where Q is measured in millions of pills per year and P is measured in dollars per pill. a. Calculate the monopoly profit-maximizing price and quantity and the monopoly deadweight loss triangle. Illustrate your answer, showing demand, marginal revenue, marginal...
Why is the deadweight loss from monopolistic competition less than the deadweight loss from a monopoly?
Why is the deadweight loss from monopolistic competition less than the deadweight loss from a monopoly?
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT