When the government places a tax on a good and all else is held constant,which of the following would most likely happen?

Question

Quizplus · Accepted Answer

When the government places a tax on a good, it increases the cost of production for the firms and they pass on the cost to the consumers. This leads to an increase in the price of the good. As a result, the overall consumption of the good decreases as people tend to buy less quantity of the good due to the increased prices. Thus, choice A is the correct answer.

When the Government Places a Tax on a Good and All