Figure 8-3
The vertical distance between points A and B represents a tax in the market.
-Refer to Figure 8-3. The deadweight loss associated with this tax amounts to
A)$80, and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses.
B)$80, and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers.
C)$60, and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses.
D)$60, and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers.

Question

Figure 8-3
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-3. The deadweight loss associated with this tax amounts to
A)$80, and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses. 
B)$80, and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers. 
C)$60, and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses. 
D)$60, and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers.

Quizplus · Accepted Answer

Deadweight loss refers to the loss of economic efficiency when the equilibrium for a good or a service is not achieved or is not achievable. In the context of taxation, it represents the surplus lost to both consumers and producers that cannot be recaptured because the tax discourages trades that would otherwise be mutually beneficial. The specific monetary value (e.g., $80) is less important without seeing Figure 8-3, but the concept described in option B accurately reflects what deadweight loss represents.

Figure 8-3 the Vertical Distance Between Points a and B Represents a Represents