In the short run,specific taxes on a firm result in
A)price increases that may not persist in the long run.
B)an increase in consumer surplus because the tax permits spending in additional government services.
C)shortages of the good being taxed.
D)an increase in producer surplus because of the rise in price.

Question

Quizplus · Accepted Answer

In the short run, a specific tax on a firm results in an increase in the cost of production, which leads to a rise in price. However, over time, firms may adjust their production process, decrease production, or exit the market altogether, resulting in a reduction in supply and a price increase that may not persist in the long run. Therefore, price increases resulting from specific taxes on a firm may not be permanent.

In the Short Run,specific Taxes on a Firm Result in