QuestionJune 4, 2025

tax on gasoline is likely to __ a. cause a greater deadweight loss in the long run when compared to the short run b. cause a greater deadweight loss in the short run when compared to the long run c. generate a deadweight loss that is unaffected by the time period over which it is measured d. none of the answer choices are correct

tax on gasoline is likely to __ a. cause a greater deadweight loss in the long run when compared to the short run b. cause a greater deadweight loss in the short run when compared to the long run c. generate a deadweight loss that is unaffected by the time period over which it is measured d. none of the answer choices are correct
tax on gasoline is likely to __
a. cause a greater deadweight loss in the long run when compared to the short run
b. cause a greater deadweight loss in the short run when compared to the long run
c. generate a deadweight loss that is unaffected by the time period over which it is measured
d. none of the answer choices are correct

Solution
4.2(213 votes)

Answer

a. cause a greater deadweight loss in the long run when compared to the short run Explanation 1. Understand Elasticity Over Time In the long run, both supply and demand for gasoline are more elastic compared to the short run. Consumers and producers have more time to adjust their behavior. 2. Analyze Deadweight Loss **Deadweight loss** increases with elasticity because it measures the loss of economic efficiency when equilibrium is not achieved. More elastic markets (long run) result in greater deadweight loss from a tax.

Explanation

1. Understand Elasticity Over Time<br /> In the long run, both supply and demand for gasoline are more elastic compared to the short run. Consumers and producers have more time to adjust their behavior.<br /><br />2. Analyze Deadweight Loss<br /> **Deadweight loss** increases with elasticity because it measures the loss of economic efficiency when equilibrium is not achieved. More elastic markets (long run) result in greater deadweight loss from a tax.
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