The general equilibrium effects of an excise tax on agricultural commodities which would then be used to purchase books for school children would tend to:
A)raise the price of agricultural commodities and lower the price of books, but leave the quantity of labor employed unchanged.
B)raise the price of agricultural commodities and raise the price of books, and increase the quantity of labor employed.
C)raise the price of agricultural commodities and raise the price of books, and decrease the quantity of labor employed.
D)raise the price of agricultural commodities and raise the price of books, but leave the quantity of labor employed unchanged.

Question

Quizplus · Accepted Answer

The excise tax on agricultural commodities will raise their price, and the revenue from the tax will be used to purchase books for school children, which will raise the price of books. However, the quantity of labor employed will not change because the tax does not affect the demand for labor.

The General Equilibrium Effects of an Excise Tax on Agricultural