Rather than prohibiting a good or service, the government might tax it. Imposing such a tax on a good or service _______ the equilibrium price and _______ the equilibrium quantity.

Question

Quizplus · Accepted Answer

Imposing a tax on a good or service typically raises the equilibrium price because the cost of production or sale increases. This, in turn, usually decreases the equilibrium quantity as higher prices lead to lower demand.

Rather Than Prohibiting a Good or Service, the Government Might