Question

32. Which of the following quantities decrease in response to a tax on a good? a. the size of the market for the good, the effective price of the good paid by buyers, and consumer surplus b. the size of the market for the good, producer surplus, and the well-being of buyers of the good (consumer surplus) c. the effective price received by sellers of the good, the wedge between the effective price paid by buyers and the effective price received by sellers, and consumer surplus d. None of the above is necessarily correct unless we know whether the tax is levied on buyers or on sellers.

Answer 1

Whenever there is a tax imposed on a particular product, there is a decrease in the quantity, a decrease in the consumer surplus, a decrease in the producer surplus and the overall efficiency, a decrease in the price received by the seller and an increase in the price received by the buyer

Select option B.