When the government imposes an excise tax in a market with a downward-sloping demand curve and an upward-sloping supply curve:

A) consumer surplus falls.
B) producer surplus falls.
C) a deadweight loss occurs.
D) consumer surplus falls,producer surplus falls,and a deadweight loss occurs.

Question

Fatou Barrow · Accepted Answer

Final Answer : D, Explanation :  When an excise tax is imposed in a market with a downward-sloping demand curve and an upward-sloping supply curve, both consumer and producer surplus are affected. Consumer surplus falls because the tax increases the price that consumers pay, and producer surplus falls because the tax reduces the price that suppliers receive. Furthermore, there is a deadweight loss, which represents the loss of economic efficiency caused by the tax. This loss occurs because the tax reduces the quantity traded in the market, distorting the incentives of both buyers and sellers. Overall, the best choice is D because all of these effects occur when an excise tax is imposed.

When the government imposes an excise tax in a market with a downward-sloping demand curve and an upward-sloping supply curve:

A) consumer surplus falls.
B) producer surplus falls.
C) a deadweight loss occurs.
D) consumer surplus falls,producer surplus falls,and a deadweight loss occurs.

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Learning Objectives

Related questions

When the government imposes an excise tax in a market with a downward-sloping demand curve and an upward-sloping supply curve:A) consumer surplus falls.B) producer surplus falls.C) a deadweight loss occurs.D) consumer surplus falls,producer surplus falls,and a deadweight loss occurs.

Definitions

Learning Objectives

Learning Objectives

Related questions

When the government imposes an excise tax in a market with a downward-sloping demand curve and an upward-sloping supply curve:

A) consumer surplus falls.
B) producer surplus falls.
C) a deadweight loss occurs.
D) consumer surplus falls,producer surplus falls,and a deadweight loss occurs.