If a good has a tax levied on it,sellers respond to the price that excludes the tax and not the price with the tax because
A) the tax is handed over to the state directly by buyers.
B) sellers do not get to keep the tax revenue.
C) the demand for the good has decreased.
D) the quantity supplied of the good increases.
E) demanders pay none of the tax.

Question

Quizplus · Accepted Answer

When a tax is levied on a good, the price paid by buyers increases and creates a discrepancy between the price received by sellers and the price paid by buyers. Sellers respond to the price that excludes the tax because they do not get to keep the tax revenue. So, they adjust their prices to maximize their profits based on the net price they receive for the good after paying the tax.

If a Good Has a Tax Levied on It,sellers Respond