Scenario 12-1
Ken places a $20 value on a cigar, and Mark places a $17 value on it. The equilibrium price for this brand of cigar is $15.
-Refer to Scenario 12-1. Suppose the government levies a tax of $1 on each cigar, and the equilibrium price of a cigar increases to $16. Because total consumer surplus has
A)fallen by more than the tax revenue, the tax has a deadweight loss.
B)fallen by less than the tax revenue, the tax has no deadweight loss.
C)fallen by exactly the amount of the tax revenue, the tax has no deadweight loss.
D)increased by less than the tax revenue, the tax has a deadweight loss.

Question

Quizplus · Accepted Answer

The Answer of Scenario 12-1
Ken places a $20 value on a cigar, and Mark places a $17 value on it. The equilibrium price for this brand of cigar is $15.
-Refer to Scenario 12-1. Suppose the government levies a tax of $1 on each cigar, and the equilibrium price of a cigar increases to $16. Because total consumer surplus has
A)fallen by more than the tax revenue, the tax has a deadweight loss.
B)fallen by less than the tax revenue, the tax has no deadweight loss.
C)fallen by exactly the amount of the tax revenue, the tax has no deadweight loss.
D)increased by less than the tax revenue, the tax has a deadweight loss.

Scenario 12-1 Ken Places a $20 Value on a Cigar, and Mark