Which statement is true of a tax levied on one product in a general equilibrium model?
A)Taxes always distort the most efficient flow of resources in an economy.
B)Taxes cannot distort efficient resource flows because they become part of the price.
C)Taxes on producers distort efficient resource flows but taxes on consumers do not affect efficiency.
D)Taxes will hurt efficiency unless they are designed to offset other inefficiencies in the system.

Question

Quizplus · Accepted Answer

The Answer of Which statement is true of a tax levied on one product in a general equilibrium model?
A)Taxes always distort the most efficient flow of resources in an economy.
B)Taxes cannot distort efficient resource flows because they become part of the price.
C)Taxes on producers distort efficient resource flows but taxes on consumers do not affect efficiency.
D)Taxes will hurt efficiency unless they are designed to offset other inefficiencies in the system.

Which Statement Is True of a Tax Levied on One