What results from the imposition of a tax on a product?
A) Some government surplus is transferred to the consumers and producers.
B) Some consumer surplus is transferred from buyers to producers.
C) Some producer surplus is transferred from sellers to consumers.
D) Some consumer and producer surplus is transferred from buyers and sellers to the government.

Question

Quizplus · Accepted Answer

When a tax is imposed on a product, it typically leads to a decrease in both consumer and producer surplus because part of the money that consumers and producers would have exchanged in a tax-free scenario is instead paid to the government in the form of the tax. This results in a transfer of economic welfare from consumers and producers to the government.

What Results from the Imposition of a Tax on a Product