Suppose the market for premium music streaming exhibits the typical downward-sloping demand curve and upward-sloping supply curve. A new excise tax placed on music streaming services would lead to _____ consumer surplus, _____ producer surplus, and _____ deadweight loss.
A) higher; lower; higher
B) lower; higher; lower
C) lower; lower; lower
D) lower; lower; higher

Question

Quizplus · Accepted Answer

An excise tax on music streaming services would lead to a higher price for consumers and a lower effective price received by producers, reducing both consumer and producer surplus. The tax also creates a deadweight loss by reducing the quantity of transactions below the level that would occur in a free market, as some consumers and producers are priced out of the market.

Suppose the Market for Premium Music Streaming Exhibits the Typical