Econ 12 Problem Set #3, 10 pts.

Prof. Fred Foldvary

Due Friday, Jan. 18

1. (2 pts) Explain the meaning of the terms

"excess burden" and "deadweight loss."

2. (2 pts) Why does a tax cause an excess burden?

3. (3 pts) What is the economic significance or consequence of the excess burden?

4. (3 pts) Is there a morally acceptable source of government revenue that does not have an excess burden?

Explain why or why not, involving both supply and demand.