Table 12-1
-Refer to Table 12-1. Assume that the price of a weekend ski pass is $45 and that the price reflects the actual unit cost of providing a weekend of skiing. Suppose the government imposes a tax of $12 on skiing, which raises the price of a weekend ski pass to $57. The deadweight loss associated with the tax is
A)$5.
B)$12.
C)$36.
D)$41.

Question

Table 12-1 
-Refer to Table 12-1. Assume that the price of a weekend ski pass is $45 and that the price reflects the actual unit cost of providing a weekend of skiing. Suppose the government imposes a tax of $12 on skiing, which raises the price of a weekend ski pass to $57. The deadweight loss associated with the tax is
A)$5. 
B)$12. 
C)$36. 
D)$41.

Quizplus · Accepted Answer

The deadweight loss is the loss in total surplus that occurs because the tax causes the quantity of skiing to decrease. It is calculated as the area of the triangle formed by the tax wedge, which is the difference between the price buyers pay ($57) and the price sellers receive ($45), and the reduction in quantity. The deadweight loss is not equal to the tax amount but is related to the change in quantity and the tax wedge.

Table 12-1 -Refer to Table 12-1. Assume That the Price of a Price