How is it that a tax creates a deadweight loss by decreasing quantity, but a subsidy creates

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How is it that a tax creates a deadweight loss by decreasing quantity, but a subsidy creates a deadweight loss by increasing quantity?

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Modern Principles of Economics

ISBN: 978-1429278393

3rd edition

Authors: Tyler Cowen, Alex Tabarrok

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Question Posted: Nov 24, 2015 08:31 AM

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How is it that a tax creates a deadweight loss by decreasing quantity, but a subsidy creates

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One way to answer this is that the free market equilibrium quantity maximizes total gains f...View the full answer

Modern Principles of Economics

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