Final answer:
The comparison between the cost of a tax and the tax revenue largely depends on the elasticity of demand and supply, which determines the tax incidence and possible deadweight loss. Without this information, it's impossible to make an accurate comparison.
Step-by-step explanation:
When the government places a tax on a product, tax revenue is calculated by multiplying the tax per unit by the total quantity sold (Qt). The tax incidence—how the tax burden is divided between consumers and sellers—depends on the elasticity of demand and supply. If demand is more elastic, consumers are likely to reduce quantity, lowering tax revenue. Conversely, if supply is elastic, sellers will likely sell less, also reducing revenue. In markets with very elastic demand and supply, an excise tax generates low revenue. Therefore, without knowledge of demand and supply elasticity, we can't compare the cost of the tax with the revenue raised accurately.
However, the cost of the tax to buyers and sellers can exceed the revenue raised by the government due to the economic distortions and welfare losses taxes can cause. These losses, known as deadweight loss, occur because taxes lead to a reduction in the quantity traded below the level that would prevail in a free market, resulting in lost utility or profit to consumers and producers.