One result of a tax,regardless of whether the tax is placed on the buyers or the sellers,is that the
A)equilibrium quantity of the good is unchanged.
B)price the buyer effectively pays is lower.
C)supply curve for the good shifts upward by the amount of the tax.
D)tax reduces the welfare of both buyers and sellers.

Question

Quizplus · Accepted Answer

A tax reduces the quantity of the good sold and raises the price paid by buyers. This reduction in quantity and increase in price decreases the welfare of both buyers and sellers. Therefore, D is the correct answer. A is incorrect because the quantity of the good sold will decrease. B is incorrect because the price paid by the buyer effectively increases due to the tax. C is incorrect because a tax causes a shift in the supply curve, but it is not necessarily upward.

One Result of a Tax,regardless of Whether the Tax Is