Let D = demand, S = supply, P = equilibrium price, Q = equilibrium quantity. If the government taxes the activity of logging tropical forests, what happens in the market for tropical hardwood?
A)D decreases, S no change, P and Q decrease.
B)D no change, S decreases, P increases, Q decreases.
C)D and S decrease, P and Q increase.
D)D no change, S decreases, P increases, Q increases.

Question

Quizplus · Accepted Answer

When the government taxes the activity of logging tropical forests, it increases the cost of production for producers, leading to a decrease in supply (S). As a result, the equilibrium price (P) will increase, and the equilibrium quantity (Q) will decrease. The demand (D) for tropical hardwood remains unchanged because the tax does not affect consumer behavior directly. Therefore, the correct answer is B, where D no change, S decreases, P increases, and Q decreases.

Let D = Demand, S = Supply, P = Equilibrium