A tax

Question

A tax

Quizplus · Accepted Answer

Both answers A and B are correct. When a tax is imposed, it increases the cost of production for the seller, which results in the supplier passing on some or all of the tax burden to consumers. This shifts the supply curve upwards, leading to a higher price for the buyer and a lower price received by the seller. This creates a wedge between what the buyer pays and what the seller receives, thereby reducing the overall surplus. This reduction in surplus affects both consumers and producers (hence A and B are correct) while providing the government with additional revenue.

A Tax