Which of the following would likely cause the greatest deadweight loss ?
Correct answer: D. a tax on cruise line ticketsTax Preparation & Planning
- A. a tax on salt
- B. a tax on cigarettes
- C. a tax on petrol
- D. a tax on cruise line ticketsTax Preparation & Planning
Explanation
A tax creates the greatest deadweight loss in a market with relatively elastic demand or supply. Cruise tickets are more discretionary and price-sensitive than necessities such as salt, cigarettes, or petrol.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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