Use the following to answer questions:
Figure: Consumer and Producer Surplus
-(Figure: Consumer and Producer Surplus) According to the figure, what would happen to the deadweight loss if the tax increased to $2 per basket of apples?
A) The new tax would minimize deadweight loss.
B) Deadweight loss does not change due to a change in the tax.
C) Deadweight loss will decrease due to a change in the tax.
D) Deadweight loss will increase.

Question

Use the following to answer questions:
Figure: Consumer and Producer Surplus 
-(Figure: Consumer and Producer Surplus) According to the figure, what would happen to the deadweight loss if the tax increased to $2 per basket of apples?
A) The new tax would minimize deadweight loss. 
B) Deadweight loss does not change due to a change in the tax. 
C) Deadweight loss will decrease due to a change in the tax. 
D) Deadweight loss will increase.

Quizplus · Accepted Answer

As the tax increases to $2 per basket of apples, the deadweight loss will increase. The new, higher tax will cause a larger distortion in the market, resulting in a greater reduction in overall welfare. This will lead to more transactions that would have taken place without the tax being forgone, ultimately increasing the deadweight loss.

Use the Following to Answer Questions