When the price of a good is measured in dollars,then the size of the deadweight loss that results from taxing that good is measured in
A)units of the good that is being taxed.
B)units of a related good that is not being taxed.
C)dollars.
D)percentage change.

Question

Quizplus · Accepted Answer

The deadweight loss resulting from taxing a good refers to the loss of consumer and producer surplus caused by the distortion of market behavior due to the tax. Since the price of the good is measured in dollars, the deadweight loss resulting from the tax would also be measured in dollars as it represents the monetary value of the lost surplus. Therefore, the correct choice is (C) dollars.

When the Price of a Good Is Measured in Dollars,then