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(Solved): Figure: The vertical distance between points A and C represents a tax in the market. Refer to Figu ...
Figure: The vertical distance between points A and C represents a tax in the market. Refer to Figure. What will the total loss to the producers as a result of taxes? a. . b. . c. . d. . QUESTION 25 Figure. The figure below is the Laffer curve which indicates the relationship between tax size and tax revenue. Refer to Figure. Assuming the government has a tax size at B, then a small decrease in the tax size will a. result into increasing the deadweight loss but decreasing the tax revenue. b. will result in decreasing both the deadweight loss and tax revenue. c. result in increasing the deadweight loss as well as tax revenue.
Expert Answer
24. When tax is imposed, the equilibrium market quantity decrease from 40 to 20. This creates the deadweight loss arising out of lack of consumption, and lack of production. The area of deadweight loss is the area below the demand curve and above the supply curve from the new quantity to the initial quantity. The graph shows that the initial equilibrium quantity is 40 and the new quantity is 20. Then the area of deadweight loss is C A D. This area is a triangle and its value is Base is , and height is Then deadweight loss = (