In the short run,specific taxes on a firm result in:
A)price increases which may not persist in the long run.
B)an increase in consumer surplus because the tax permits spending in additional government services.
C)shortages of the good being taxed.
D)an increase in producer surplus because of the rise in price.

Question

Quizplus · Accepted Answer

In the short run, specific taxes on a firm result in price increases as the firm passes on the tax burden to consumers. However, in the long run, the firm may be able to find ways to reduce the cost of production or decrease the quantity supplied, which may result in lower prices. Therefore, price increases may not persist in the long run.

In the Short Run,specific Taxes on a Firm Result In