Which of the following conditions must hold in the equilibrium of a competitive market where the government puts a specific tax on consumers?
A) The quantity sold and the price paid by the buyer must lie on the demand curve.
B) The quantity sold and the seller's price must lie on the supply curve.
C) The quantity demanded must equal the quantity supplied.
D) the difference between the price the buyer pays and the price the seller receives must equal the specific tax.
E) all of the above

Question

Quizplus · Accepted Answer

In a competitive market equilibrium with a specific tax on consumers, all the conditions listed must hold. The quantity sold and the price paid by the buyer must lie on the demand curve (A), and the quantity sold and the seller's price must lie on the supply curve (B), ensuring that the market clears (C). The difference between the price the buyer pays and the price the seller receives equals the specific tax (D), which is the definition of a specific tax's impact on market prices.

Which of the Following Conditions Must Hold in the Equilibrium