In Chapter 6, we said that taxes create deadweight losses. When we tax goods with external costs, should we worry about deadweight losses? Why or why not? Any deadweight losses O should not conern us. Deadweight losses are the result of transactions that no longer occur and the problem with negative externalities is that too many transactions occur. O should concern us. If there is a negative externality associated with a good, the deadweight loss from a tax simply exacerbates society's welfare costs. from a tax are counter-productive. Why would we tax goods with negative externalities when the remedy for a negative externality is a subsidy? should concern us. Deadweight losses sound bad because they are bad; we should always avoid deadweight losses.
In Chapter 6, we said that taxes create deadweight losses. When we tax goods with external costs, should we worry about deadweight losses? Why or why not? Any deadweight losses O should not conern us. Deadweight losses are the result of transactions that no longer occur and the problem with negative externalities is that too many transactions occur. O should concern us. If there is a negative externality associated with a good, the deadweight loss from a tax simply exacerbates society's welfare costs. from a tax are counter-productive. Why would we tax goods with negative externalities when the remedy for a negative externality is a subsidy? should concern us. Deadweight losses sound bad because they are bad; we should always avoid deadweight losses.
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter12: Environmental Protection And Negative Externalities
Section: Chapter Questions
Problem 40P: Show the market for cigarettes in equilibrium, assuming that there are no laws banning smoking in...
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Transcribed Image Text:Externalities: End of Chapter Problem
In Chapter 6, we said that taxes create deadweight losses. When we tax goods with external costs, should we worry about
deadweight losses? Why or why not?
Any deadweight losses
O should not conern us. Deadweight losses are the result of transactions that no longer occur and the problem with
negative externalities is that too many transactions occur.
O should concern us. If there is a negative externality associated with a good, the deadweight loss from a tax simply
exacerbates society's welfare costs.
from a tax are counter-productive. Why would we tax goods with negative externalities when the remedy for a negative
externality is a subsidy?
should concern us. Deadweight losses sound bad because they are bad; we should always avoid deadweight losses.
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