Answer to Question #176348 in Microeconomics for Saqib Imran

Question

If the government quadruples the amount of tax on gasoline, can you be sure that revenue from 

gasoline tax will rise? Can you be sure that the deadweight loss from the gasoline tax will rise? 

Explain. (Hint: Incorporate graphs)

Answer 1

 It would more than quadruple.   

Dead weight loss is an excess burden which measures the loss of economic efficiency. When the government quadruple the tax rate of gasoline, the supply cure will shift upward or supply falls down. Thus the price paid by the customers increased and the price received by sellers fall down. Dead weight loss will increase fourfold with increase in tax rates.