Suppose x is an inferior good. Then we will overestimate the deadweight loss from taxes on consumption good x if we use the uncompensated demand curve rather than the marginal willingness to pay (or compensated demand) curve.
Answer the following statement true (T) or false (F)
False
Rationale: Uncompensated demand curves are steeper than compensated demand curves when goods are inferior. As a result, the deadweight loss would be under-estimated if the uncompensated demand curve were used to estimate the deadweight loss.
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