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Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

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BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050
Textbook Problem

Evaluate the following two statements. Do you agree? Why or why not?

a. "A tax that has no deadweight loss cannot raise any revenue for the government."

b. "A tax that raises no revenue for the government cannot have any deadweight loss."

(a):

To determine

The impact of tax with no deadweight loss.

Explanation

A tax will lead to reduction in the consumer surplus and the producer surplus because it increases the price that the consumer pays and decreases the price that the sellers receive from the sale of the goods in the market. The given statement here is that the tax which creates no deadweight loss does not raises the tax revenue...

(b):

To determine

The impact of tax on the tax revenue.

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