Question

if the tax on a good is increased from $1 per unit to $4 per unit, the deadweight loss from the tax increases by a factor of

Answer 1

The deadweight loss from the tax rises by a factor of 16 if the levy on a good goes from $1 per unit to $4 per unit.

What is deadweight loss?

In economics, deadweight loss is the difference between the consumption and production of any given commodity or service, including government taxes.

The existence of deadweight loss is most typically detected when the quantity generated relative to the amount consumed departs from the optimal concentration of surplus.

This disparity in amount represents the quantity that is not used or eaten, resulting in a loss. This "deadweight loss" is thus assigned to both producers and consumers because none benefits from the overall output excess.

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