A per unit tax will:
A)only cause a deadweight loss if the demand is perfectly inelastic.
B)have a symmetrical effect on consumers and firms.
C)decrease the price paid by consumers.
D)increase prices by less than the amount of the tax.

Question

Quizplus · Accepted Answer

A per unit tax will increase the cost of production for firms, leading to an increase in the price of the good. However, this increase in price may be less than the amount of the tax if firms are able to shift some of the burden onto consumers by decreasing their quantity supplied. Therefore, the price increase may not be equal to the amount of the tax.

A Per Unit Tax Will