When a tax is placed on a good
A)the price paid by buyers rises, and the price received by sellers rises.
B)the price paid by buyers rises, and the price received by sellers falls.
C)the price paid by buyers falls, and the price received by sellers rises.
D)the price paid by buyers falls, and the price received by sellers falls.

Question

When a tax is placed on a good
A)​the price paid by buyers rises, and the price received by sellers rises.
B)​the price paid by buyers rises, and the price received by sellers falls.
C)​the price paid by buyers falls, and the price received by sellers rises.
D)​the price paid by buyers falls, and the price received by sellers falls.

Quizplus · Accepted Answer

When a tax is placed on a good, the price paid by buyers increases because they now have to pay more to purchase the same amount of the good. At the same time, the price received by sellers decreases because they now have to sell the same amount of the good at a lower price in order to cover the tax. Therefore, the price paid by buyers rises, and the price received by sellers falls.

When a Tax Is Placed on a Good