Clothing is sold in perfectly competitive markets where no externalities prevail.An excise tax on clothing will result in a market price for clothing that equals the marginal social benefit and mar?ginal social cost of service.

Question

Quizplus · Accepted Answer

The statement is false. An excise tax will cause the market price to rise, which will result in a quantity demanded that is less than the socially optimal quantity. This will create deadweight loss and result in a market price that is higher than the marginal social benefit and lower than the marginal social cost.

Clothing Is Sold in Perfectly Competitive Markets Where No Externalities