Chapter 70, Problem 7MCQ

To determine

The deadweight loss when land is used to distribute the economic rent from the fixed supply of land

Answer to Problem 7MCQ

From the available options, the correct option is zero.

Explanation of Solution

If a tax is charged on goods in a market where supply is fixed such as land or it can be said perfectly inelastic, then there would be no deadweight loss or zero deadweight loss because the whole tax burden is beard by the seller.

Therefore, the deadweight loss cannot be to the equal size of the tax, negative, larger than the tax, or equal to the entire price of the land and here, the correct option would be e (zero).

Economics Concept Introduction

Introduction: Supply is the availability of goods and services in the market that can be sold to consumers, and fixed supply is the constant supply of goods or the supply of goods that cannot be changed in the market such as land.