Question

When the government imposes taxes on buyers or sellers of a good, society A. loses some of the benefits of market efficiency. B. gains efficiency but loses equality. C. moves from an elastic supply curve to an inelastic supply curve. D. is better off because the government's tax revenues exceed the deadweight loss.

Answer 1

Answer:

A) loses some of the benefits of market efficiency.

Explanation:

Taxes always result in deadweight losses. Deadweight loss refers to allocative inefficiencies resulting from an alteration in the equilibrium quantities and economic surplus.

Taxes always increase the price of goods or services, and that increase reduces the equilibrium quantity, therefore resulting in lower economic surplus (lower consumer surplus and lower supplier surplus). The price of a good or service is higher, decreasing the quantity demanded, but the net amount received by the supplier is lower, decreasing the quantity supplied.