Suppose that a university charges students a $100 "tax" to register for business classes. The next year the university raises the "tax" to $150. The deadweight loss from the "tax" triples.

Question

Quizplus · Accepted Answer

The deadweight loss from a tax does not necessarily triple just because the tax itself increases by 50%. The actual change in deadweight loss depends on the elasticity of supply and demand for the classes.

Suppose That a University Charges Students a $100 "Tax" to Register