Exhibit 7-11
-A competitive equilibrium model does a good job of predicting the effects of the introduction of a new tax on a good or service.

Question

Exhibit 7-11 
-A competitive equilibrium model does a good job of predicting the effects of the introduction of a new tax on a good or service.

Quizplus · Accepted Answer

A competitive equilibrium model takes into account how consumers and producers will react to changes in prices, which in turn affects the quantity demanded and supplied. Therefore, it can accurately predict the effects of introducing a new tax on a good or service.

Exhibit 7-11 -A Competitive Equilibrium Model Does a Good Job of Predicting