If all relevant private and social costs and benefits are included in the demand and supply curves for a particular good,then imposing a tax will

Question

Quizplus · Accepted Answer

If all relevant private and social costs and benefits are considered in the demand and supply curves, then the market outcome will be at the efficient level of production and consumption. Imposing a tax will increase the price for consumers, reduce the price received by producers, and also reduce production and consumption, which will further move the market outcome away from the efficient level. Therefore, option C is the best choice as it correctly states that the tax will lead to production and consumption below the efficient level.

If All Relevant Private and Social Costs and Benefits Are