Housing construction is generally believed to be an industry of constant costs.In the long run, which of the following is true if a $10 per square foot tax on housing construction is collected directly from builders?

Question

Quizplus · Accepted Answer

Housing construction is generally believed to be an industry of constant costs, meaning that builders may not be able to absorb the entire tax without increasing prices. Therefore, the tax is likely to be fully shifted to buyers of new construction, resulting in a decrease in the quantity of new construction supplied. The excess burden of the tax may also not be zero as the tax may lead to a deadweight loss by reducing the efficiency of the housing market.

Housing Construction Is Generally Believed to Be an Industry of Constant