Figure 8-22
-Refer to Figure 8-22.Suppose the government changed the per-unit tax from $3.00 to $4.50.Compared to the original tax rate,this higher tax rate would
A)increase tax revenue and increase the deadweight loss from the tax.
B)increase tax revenue and decrease the deadweight loss from the tax.
C)decrease tax revenue and increase the deadweight loss from the tax.
D)decrease tax revenue and decrease the deadweight loss from the tax.

Question

Figure 8-22 
-Refer to Figure 8-22.Suppose the government changed the per-unit tax from $3.00 to $4.50.Compared to the original tax rate,this higher tax rate would
A)increase tax revenue and increase the deadweight loss from the tax. 
B)increase tax revenue and decrease the deadweight loss from the tax. 
C)decrease tax revenue and increase the deadweight loss from the tax. 
D)decrease tax revenue and decrease the deadweight loss from the tax.

Quizplus · Accepted Answer

Increasing the tax rate from $3.00 to $4.50 would shift the supply curve upward, resulting in a new equilibrium with a higher price and lower quantity traded. This higher tax rate would increase tax revenue, as the government collects a tax on each unit sold, and would also increase the deadweight loss from the tax, as more market activity is lost due to the higher tax burden on buyers and sellers. Therefore, option A is correct.

Figure 8-22 -Refer to Figure 8-22.Suppose the Government Changed the Per-Unit Tax