One result of a tax,regardless of whether the tax is placed on the buyers or the sellers,is that the
A) size of the market is unchanged.
B) price the seller effectively receives is higher.
C) supply curve for the good shifts upward by the amount of the tax.
D) tax reduces the welfare of both buyers and sellers.

Question

Quizplus · Accepted Answer

A tax creates a wedge between the price that buyers pay and the price that sellers receive, resulting in a decrease in the quantity traded and a deadweight loss. This decrease in quantity traded reduces the welfare of both buyers and sellers. Therefore, option D is the correct choice. Option A is incorrect because the quantity traded does change. Option B is incorrect because the price the seller effectively receives is lower due to the tax. Option C is incorrect because the supply curve shifts upward by the amount of the tax only when the tax is placed on the sellers.

One Result of a Tax,regardless of Whether the Tax Is