(1) What happens to consumer and producer surplus when the sale of a good is taxed? How does the change in consumer and producer surplus compare to the tax revenue? Explain.

(2) Draw a supply-and-demand diagram with a tax on the sale of a good. Show the deadweight loss. Show the tax revenue.

(3) Evaluate the following two statements. Do you agree? Why or why not? (A). "A tax that has no deadweight loss cannot raise any revenue for the government."

(B). "A tax that raises no revenue for the government cannot have any deadweight loss."