Microeconomics Chapter 8 Study Guide
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Which of the following would likely cause the greatest deadweight loss?
A tax on cruise line tickets
A tax on gasoline is likely to
Cause a greater deadweight loss in the long run when compared to the short run
When a tax distorts incentives to buyers and sellers so that fewer goods are produced and sold, the tax has:
Caused a deadweight loss
The reduction of a tax:
Could increase tax revenue if the tax had been extremely high
When a tax on a good starts small and is gradually increased, tax revenue will:
First rise, then fall
Suppose the supply of diamonds is relatively inelastic. A tax on diamonds would likely generate a:
Small deadweight loss and the burden of the tax would fall on the seller of the diamonds
