Given a downward sloping demand curve, a tax on the supply of a good will result in an increase in equilibrium price that is less than the amount of the tax.
Answer the following statement true (T) or false (F)
True
At a price equal to the original price plus the tax, demanders are not willing to purchase the original quantity. At the original equilibrium price plus the tax, quantity supplied exceeds quantity demanded. To eliminate excess supply, suppliers lower the price until quantity demanded equals quantity supplied.
You might also like to view...
Which of the following is consistent with the circular flow of income?
I. Goods and services flow in one direction. II. Payments and incomes flow in one direction. III. Sellers receive less than what buyers spend. A) I only B) II only C) III only D) Both I and II
Since World War II, tariff reductions have occurred in large part because of negotiations under the:
a. Industry and Trade Administration Act. b. Employment Act. c. Monetary Control Act. d. General Agreement on Tariffs and Trade.