Table 8-1

$$\begin{array} { | c | c | }
\hline \text { Market } & \text { Characteristic } \
\hline \text { A } & \text { Demand is very el astic relative to supply. } \
\hline \text { B } & \text { Demand is very inelastic relative to supply. } \
\hline \text { C } & \text { Supply is very elastic relative to demand. } \
\hline \text { D } & \text { Supply is very inel astic rel ative to demand. } \
\hline
\end{array}$$
-Refer to Table 8-1. Suppose the government is considering levying a tax in one or more of the markets described in the table. Which of the markets will allow the government to minimize the deadweight loss(es) from the tax?
A)Market A only
B)Markets A and C only
C)Markets B and D only
D)Market C only

Question

Table 8-1
​
​
 $$\begin{array} { | c | c | } 
\hline \text { Market } & \text { Characteristic } \
\hline \text { A } & \text { Demand is very el astic relative to supply. } \
\hline \text { B } & \text { Demand is very inelastic relative to supply. } \
\hline \text { C } & \text { Supply is very elastic relative to demand. } \
\hline \text { D } & \text { Supply is very inel astic rel ative to demand. } \
\hline
\end{array}$$ ​
-Refer to Table 8-1. Suppose the government is considering levying a tax in one or more of the markets described in the table. Which of the markets will allow the government to minimize the deadweight loss(es) from the tax?
A)Market A only
B)Markets A and C only
C)Markets B and D only
D)Market C only

Quizplus · Accepted Answer

Deadweight loss is minimized in markets where either demand or supply (or both) is inelastic, as the quantity traded is less responsive to price changes. Markets B and D, where demand or supply is very inelastic, will thus minimize the deadweight losses from a tax.

Table 8-1 ​ ​ ​ -Refer to Table 8-1

Table 8-1

-Refer to Table 8-1