The deadweight loss associated with a tax on a commodity is generated by
A)the consumers who still choose to consume the commodity but pay a higher price that reflects the tax.
B)the consumers who choose to not consume the commodity that is taxed.
C)all citizens who are able to use services provided by government.
D)the consumers who are unable to avoid paying the tax.

Question

Quizplus · Accepted Answer

The deadweight loss associated with a tax on a commodity is generated by the reduction in the quantity of the commodity consumed. This occurs because some consumers choose not to consume the commodity due to the higher price resulting from the tax, leading to a loss of economic efficiency.

The Deadweight Loss Associated with a Tax on a Commodity