If a tax is placed on tires,then
i.the equilibrium quantity of tires will decrease.
ii.a deadweight loss will be created.
iii.the producer surplus will decrease.
A) i only
B) ii only
C) i and iii
D) i and ii
E) i, ii, and iii

Question

Quizplus · Accepted Answer

When a tax is placed on tires, it affects the market by decreasing the equilibrium quantity of tires due to the increased cost for consumers and/or producers, creating a deadweight loss because the market is no longer operating at maximum efficiency, and reducing the producer surplus as producers receive less for their product after the tax is accounted for.

If a Tax Is Placed on Tires,then