A tax would not impose a welfare cost only if:
A)the quantity exchanged did not change as a result.
B)supply was perfectly elastic.
C)supply was unit elastic.
D)the demand curve was perfectly elastic.

Question

A tax would not impose a welfare cost only if:​
A)​the quantity exchanged did not change as a result.
B)​supply was perfectly elastic.
C)​supply was unit elastic.
D)​the demand curve was perfectly elastic.

Quizplus · Accepted Answer

A tax would not impose a welfare cost if the quantity exchanged did not change as a result. This is because if the quantity exchanged stays the same, there is no deadweight loss from the tax. However, if supply is perfectly elastic, unit elastic, or if the demand curve is perfectly elastic, a tax would still impose a welfare cost regardless of whether the quantity exchanged changes or not.

A Tax Would Not Impose a Welfare Cost Only If:​

A Tax Would Not Impose a Welfare Cost Only If: