Figure 8-10
The vertical distance between points A and B represents the original tax.
-Refer to Figure 8-10.If the government changed the per-unit tax from $5.00 to $7.50,then the price paid by buyers would be $10.50,the price received by sellers would be $3,and the quantity sold in the market would be 0.5 units.Compared to the original tax rate,this higher tax rate would
A) increase government revenue and increase the deadweight loss from the tax.
B) increase government revenue and decrease the deadweight loss from the tax.
C) decrease government revenue and increase the deadweight loss from the tax.
D) decrease government revenue and decrease the deadweight loss from the tax.

Question

Figure 8-10
The vertical distance between points A and B represents the original tax. 
-Refer to Figure 8-10.If the government changed the per-unit tax from $5.00 to $7.50,then the price paid by buyers would be $10.50,the price received by sellers would be $3,and the quantity sold in the market would be 0.5 units.Compared to the original tax rate,this higher tax rate would
A) increase government revenue and increase the deadweight loss from the tax. 
B) increase government revenue and decrease the deadweight loss from the tax. 
C) decrease government revenue and increase the deadweight loss from the tax. 
D) decrease government revenue and decrease the deadweight loss from the tax.

Quizplus · Accepted Answer

Increasing the tax rate decreases the quantity sold, which reduces government revenue and increases the deadweight loss due to the larger distortion in the market.

Figure 8-10 the Vertical Distance Between Points a and B Represents the Represents