The market for a good is in equilibrium when the government unexpectedly imposes a quantity tax of $2 per unit.In the short run, the price will rise by $2 per unit so that firms can regain their lost revenue and continue to produce.

Question

Quizplus · Accepted Answer

When a government imposes a quantity tax, the burden of the tax is typically shared between consumers and producers, depending on the elasticity of demand and supply. The price paid by consumers usually increases by less than the tax amount, and the price received by producers decreases. The market adjusts to a new equilibrium where the quantity supplied and demanded is lower than before the tax.

The Market for a Good Is in Equilibrium When the Government