Which of the following events always would increase the size of the deadweight loss that arises from the tax on gasoline?
A)The demand for gasoline becomes more inelastic.
B)The slope of the supply curve for gasoline becomes steeper.
C)The amount of the tax per gallon of gasoline increases.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

An increase in the tax per gallon of gasoline will always increase the deadweight loss, as it increases the gap between the price paid by buyers and received by sellers. Options A and B may or may not affect the size of deadweight loss, as it depends on the magnitude of the changes in elasticity and slope of the curves, respectively.

Which of the Following Events Always Would Increase the Size