Refer to Figure 4-25. The equilibrium price before the tax is imposed is

A) P₁.
B) P₂.
C) P₃.
D) impossible to determine from the figure.

Equilibrium Price

The price at which the quantity of a good demanded by consumers equals the quantity supplied by producers, leading to market stability.

Tax

A compulsory financial charge or other levy imposed on an individual or a legal entity by a governmental organization.

Market

A venue for the exchange of goods, services, or information between buyers and sellers, which may be physical or virtual.