Question

Indicate whether each of the following statements is true or faise Statement 1. The government can raise revenue by taxing the sellers without creating deadweight loss when the demand for the goods being taxed is perfectly inelastic 2. A tax that raises no revenue for the government cannot have any deadweight loss.

Answer 1

Answer and Explanation:

The indication of the following statement regarding true or false is

For Statement 1

This given statement is true as the demand is perfectly inelastic so there is no deadweight loss because quantity does not change or not have any impact

Therefore, in this case, the government only raise revenue but at the same time when there is an increase in elasticity so there is a change in deadweight loss

For Statement 2

This given statement is false as if no revenue is there, there will be deadweight loss