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Kimberlly Correia
on Dec 11, 2024

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The excess burden or deadweight loss of a tax refers to the

A) increase in product price as a result of the tax.
B) growth in government funded programs as a result of the revenue generated by the tax.
C) loss of disposable income consumers suffer from the tax.
D) reduction in gains from mutually beneficial exchanges that are eliminated as a result of the tax.

Excess Burden

Refers to the cost to society created by market inefficiency, which occurs when supply and demand are out of equilibrium.

Deadweight Loss

A loss of economic efficiency that can occur when the free market equilibrium for a good or a service is not achieved, leading to a net loss in total surplus.

Mutual Exchanges

A process where parties agree to transfer goods, services, or other items of value with each other.

  • Examine the impact of excise taxes on products with varying demand elasticity and understand the notion of deadweight loss.
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Jamie AbrahmsDec 13, 2024
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