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Economics

ing statem

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter8: Application: The Cost Of Taxation

Section8.2: The Determinants Of The Deadweight Loss

Problem 2QQ: The demand for beer is more elastic than the demand for milk. Would a tax on beer or a tax on milk...

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Question

Demand for a good is perfectly ELASTIC while supply is regularly shaped. Suppose the government taxes the good. Which of the following statements is true:

	A.	The tax will create deadweight loss
	B.	The tax will NOT create deadweight loss

Definition Definition Cost to society created by market inefficiency when supply and demand are not in market equilibrium.

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