Because taxes distort incentives, they typically result in
A)deadweight losses.
B)reductions in consumer surplus.
C)reductions in producer surplus.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

Taxes can create deadweight losses as they change the market equilibrium and reduce the amount of consumer and producer surplus. Both consumers and producers will face different incentives as a result of the tax. The reduction in consumer and producer surplus is a result of these behavioral changes. Hence, all of the given options are correct.

Because Taxes Distort Incentives, They Typically Result in