A pollution tax will increase the cost of production for producers, leading to an increase in the price of the product. However, buyers may also share the burden of the tax by paying a higher price. Therefore, the tax burden is shared between buyers and sellers.

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A Pollution Tax Will

Question 309

Multiple Choice

A pollution tax will

A) always be paid entirely by producers.
B) not change the price buyers pay for a good.
C) be shared between buyers and sellers.
D) always be paid entirely by buyers in the form of a price increase equal to the amount of the tax.

Correct Answer: