In a competitive market, if both demand and supply curves are linear, then a per unit tax of $10 will generate exactly the same deadweight loss as a per unit subsidy of $10.
Added by Nathan T.
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Deadweight loss is the loss of economic efficiency that occurs when the equilibrium quantity and price of a good or service is not at the point where the supply and demand curves intersect. It is the loss of consumer and producer surplus that occurs when a tax or Show more…
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