Question

Deadweight loss in a tax system refers to:

• A. The loss of economic efficiency that can occur when a tax discourages mutually beneficial transactions.
• B. The total amount of tax revenue collected by the government.
• C. The increase in the price of a good or service after a tax is imposed.
• D. The reduction in consumer surplus due to the tax.

Answer 1

Answer:

A. The loss of economic efficiency that can occur when a tax discourages mutually beneficial transactions.

• Deadweight loss represents the net loss of consumer and producer surplus that is not offset by an increase in government tax revenue.