Because taxes affect only the price paid by the buyer, they cannot have an adverse impact on the allocation of society's resources.

Question

Quizplus · Accepted Answer

Taxes can have adverse effects on the allocation of society's resources because they can affect the behavior of both buyers and sellers. For example, taxes on certain goods may decrease demand for those goods, leading to a decrease in the resources allocated to producing them. Taxes on businesses may also discourage innovation and investment, leading to a decrease in resources allocated to research and development.

Because Taxes Affect Only the Price Paid by the Buyer