CHAPTER 8: THE COST OF TAXATION1. 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.”The
statement “A tax that has no deadweight loss cannot raise any revenue for thegovernment” is
incorrect. Consider the instance of a tax in which either supply or demandis fully inelastic. The tax has
no influence on quantity and causes no deadweight loss, butit does raise income.b. “A tax that raises
no revenue for the government cannot have any deadweight loss.”The statement “A tax that
raises no revenue for the government cannot have naydeadweight loss” is incorrect. As an
example, consider the circumstance of a 100% taxlevied on merchants. Sellers will not supply any of
the good if they are taxed 100% ontheir sales, hence the tax will generate no income. Nonetheless,
the tax has a significantdeadweight loss since it decreases the quantity sold to zero