If a tax is imposed on a good,________.

Question

Quizplus · Accepted Answer

Imposing a tax on a good raises the cost for both the producers and consumers. This causes the overall demand for the good to decrease and the supply to increase, leading to a decline in the equilibrium quantity traded in the market. Therefore, the most suitable option is D. Neither A nor B is correct since taxes usually reduce consumer and producer surpluses for the taxed item. C is not correct because taxes generally reduce the quantity traded in the market.

If a Tax Is Imposed on a Good,________