As a result of a per-unit tax on output in a market:
A)the quantity traded increases.
B)the quantity traded does not change.
C)the quantity traded decreases.
D)a surplus is created at the new equilibrium price.

Question

As a result of a per-unit tax on output in a market:
A)​the quantity traded increases.
B)​the quantity traded does not change.
C)​the quantity traded decreases.
D)​a surplus is created at the new equilibrium price.

Quizplus · Accepted Answer

A per-unit tax on output in a market raises the cost of production for suppliers. As a result, they will have to increase the price of their products to maintain their profit margins. The higher price will lead to a decrease in demand for the product, as some consumers will be unwilling or unable to pay the higher price. This will cause a decrease in the quantity of the product traded in the market. Therefore, the correct answer is C.

As a Result of a Per-Unit Tax on Output in a Market