A tax on a good
A)raises the price that buyers effectively pay and raises the price that sellers effectively receive.
B)raises the price that buyers effectively pay and lowers the price that sellers effectively receive.
C)lowers the price that buyers effectively pay and raises the price that sellers effectively receive.
D)lowers the price that buyers effectively pay and lowers the price that sellers effectively receive.

Question

Quizplus · Accepted Answer

A tax on a good increases the cost of production for sellers, who then pass on the cost to buyers by charging a higher price. As a result, buyers effectively pay a higher price, while sellers receive a lower price after paying the tax. Thus, the tax raises the price that buyers effectively pay and lowers the price that sellers effectively receive.

A Tax on a Good