Suppose the government places a per-unit tax on a good.The smaller the price elasticities of demand and supply for the good,the
A)smaller the deadweight loss from the tax.
B)greater the deadweight loss from the tax.
C)less efficient is the tax.
D)more equitable is the distribution of the tax burden between buyers and sellers.

Question

Quizplus · Accepted Answer

The smaller the price elasticities of demand and supply, the less responsive consumers and producers are to changes in price. This means that the tax will cause a smaller change in the quantity demanded and supplied, leading to a smaller deadweight loss from the tax. Therefore, choice A is the best answer.

Suppose the Government Places a Per-Unit Tax on a Good