A tax on a good reduces the welfare of buyers and sellers. Because a tax on a good raises the price buyers pay and lowers the price sellers receive.
So a tax on a good reduces consumer surplus (benefit for buyers) and producer surplus (benefit for sellers)
Even though a tax on a good raises the revenue, there are losses to the buyers and sellers because of the tax which can exceed the revenue raised by the Government.
Tax and deadweight tax:
Mr. J pays $50 to Mr. C for mowing his lawn every week. Government imposed mowing tax of $10 on Mr. C, as a result, Mr. C raised his price to $60. Mr. J continues to hire him at new price also.
Mr. C increased the mowing price by $10 and pays the same amount as tax; hence, he does not feel better off. Hence, his producer surplus is 0.
Mr. J pays additional amount of $10 for mowing his lawn which is levied as mowing tax by the government. Hence, his consumer surplus is 0.
Mr. J wants to mow his loan; hence, the government earns revenue worth of $10 by imposing tax on mowing.
The consumer and producer surplus is zero and government revenue is $10.
Hence, the option 'a' is correct.
Levied tax on egg and deadweight loss:
Egg market has a linear and downward slopping demand curve and a linear and upward slopping supply curve. The tax rate on egg increased from $0.02 to $0.03.
The burden of tax will be bear by producers or consumers depend on the price elasticity of demand and supply.
If the demand for egg is price inelastic, then tax burden will be borne by the producers. Likewise, if the supply of egg is price inelastic, then tax burden will be borne by the consumers.
The consumer and producer surplus being derived from price elasticity of demand and supply will decide the deadweight loss.
Hence, the option 'd' is correct.