When a good is taxed,
A)both buyers and sellers of the good are made worse off.
B)only buyers are made worse off, because they ultimately bear the burden of the tax.
C)only sellers are made worse off, because they ultimately bear the burden of the tax.
D)neither buyers nor sellers are made worse off, since tax revenue is used to provide goods and services that would otherwise not be provided in a market economy.

Question

Quizplus · Accepted Answer

When a good is taxed, both buyers and sellers are made worse off because the tax increases the price buyers pay and decreases the price sellers receive, leading to a decrease in the quantity traded and a loss of economic efficiency.

When a Good Is Taxed