The deadweight loss associated with an import tariff or quota becomes larger when supply and demand are elastic (option c).

Here's why:

1. Deadweight loss refers to the loss of economic efficiency when the equilibrium outcome is not achievable or not achieved. In the context of import tariffs or quotas, this is the loss of efficiency in the global market due to the restriction of trade.

2. When supply and demand are elastic, it means that the quantity demanded or supplied responds significantly to changes in price.

3. If a tariff or quota is imposed, it raises the price of the imported goods. If demand is elastic, consumers will significantly reduce their quantity demanded in response to the price increase. Similarly, if supply is elastic, producers will significantly increase their quantity supplied in response to the price increase.

4. The larger reductions in quantity demanded and increases in quantity supplied lead to a larger surplus of goods on the market, which is a form of inefficiency. This surplus represents the deadweight loss.

5. Therefore, the more elastic the supply and demand, the larger the deadweight loss associated with an import tariff or quota.

Question

The deadweight loss associated with an import tariff or quota becomes larger when supply and demand are elastic (option c).

Here's why:

1. Deadweight loss refers to the loss of economic efficiency when the equilibrium outcome is not achievable or not achieved. In the context of import tariffs or quotas, this is the loss of efficiency in the global market due to the restriction of trade.

2. When supply and demand are elastic, it means that the quantity demanded or supplied responds significantly to changes in price.

3. If a tariff or quota is imposed, it raises the price of the imported goods. If demand is elastic, consumers will significantly reduce their quantity demanded in response to the price increase. Similarly, if supply is elastic, producers will significantly increase their quantity supplied in response to the price increase.

4. The larger reductions in quantity demanded and increases in quantity supplied lead to a larger surplus of goods on the market, which is a form of inefficiency. This surplus represents the deadweight loss.

5. Therefore, the more elastic the supply and demand, the larger the deadweight loss associated with an import tariff or quota.

Knowee AI · Accepted Answer

The deadweight loss associated with an import tariff or quota becomes larger when supply and demand are elastic (option c).

Here's why:

1. Deadweight loss refers to the loss of economic efficiency when the equilibrium outcome is not achievable or not achieved. In the context of import tariffs or quotas, this is the loss of efficiency in the global market due to the restriction of trade.

2. When supply and demand are elastic, it means that the quantity demanded or supplied responds significantly to changes in price.

3. If a tariff or quota is imposed, it raises the price of the imported goods. If demand is elastic, consumers will significantly reduce their quantity demanded in response to the price increase. Similarly, if supply is elastic, producers will significantly increase their quantity supplied in response to the price increase.

4. The larger reductions in quantity demanded and increases in quantity supplied lead to a larger surplus of goods on the market, which is a form of inefficiency. This surplus represents the deadweight loss.

5. Therefore, the more elastic the supply and demand, the larger the deadweight loss associated with an import tariff or quota.

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