Taxes change behavior in which of the following ways? Taxes alter the incentives faced by market participants. Taxes drive a wedge between the price paid by buyers and the price received by sellers. Taxes result in a lower equilibrium quantity of the good or service being consumed. Taxes increase consumer and producer surplus.

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Taxes alter incentives by affecting the costs and benefits of different economic activities, drive a wedge between the price buyers pay and sellers receive, and generally result in a lower equilibrium quantity as the market adjusts to the tax. Taxes typically decrease consumer and producer surplus by creating a deadweight loss, not increasing it.

Taxes Change Behavior in Which of the Following Ways? Taxes