As a result of the imposition of a tax on a product:
A)some consumer surplus is transferred from buyers to producers.
B)some producer surplus is transferred from sellers to consumers.
C)some consumer and producer surplus is transferred from buyers and sellers to the government.
D)there is no change in either consumer or producer surplus.

Question

As a result of the imposition of a tax on a product:​
A)​some consumer surplus is transferred from buyers to producers.
B)​some producer surplus is transferred from sellers to consumers.
C)​some consumer and producer surplus is transferred from buyers and sellers to the government.
D)​there is no change in either consumer or producer surplus.

Quizplus · Accepted Answer

Imposition of tax on a product results in a decrease in consumer and producer surplus, as the tax is levied on both parties. The tax revenue collected by the government is a gain for the government, which represents a transfer of surplus from buyers and sellers to the government. Hence, some consumer and producer surplus is transferred from buyers and sellers to the government.

As a Result of the Imposition of a Tax on a Product:​

As a Result of the Imposition of a Tax on a Product: