If the government wanted to reduce the quantity of a good traded, it could do so by:
A)setting a price ceiling for the good below the equilibrium price.
B)setting a price floor for the good above the equilibrium price.
C)tax the good more heavily.
D)tax an input used intensively in the industry more heavily.
E)doing any of the above.

Question

Quizplus · Accepted Answer

Any of the above options could potentially reduce the quantity of a good traded.

A)Setting a price ceiling below the equilibrium price would create a shortage, reducing the quantity of the good traded. 
B)Setting a price floor above the equilibrium price would create a surplus, which could reduce demand and ultimately reduce the quantity of the good traded. 
C)Taxing the good more heavily would raise the cost of production, leading to a reduction in supply and potentially reduce the quantity traded. 
D)Taxing an input used intensively in the industry more heavily could raise production costs, reducing supply and reducing the quantity of the good traded.

Therefore, the government could choose any of the above options to reduce the quantity of a good traded.

If the Government Wanted to Reduce the Quantity of a Good