When a Tax Is Levied on a Good or Service

question 4

Multiple Choice

When a tax is levied on a good or service,

• A) buyers are worse off, but sellers are unaffected.
• B) both buyers and sellers are worse off.
• C) both buyers and sellers are unaffected.
• D) sellers are worse off, but buyers are better off.

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Definitions:

MP

Marginal Product, which refers to the additional output resulting from using one more unit of a productive input, holding all other inputs constant.

Wage Rate

The fixed amount of compensation paid to an employee by an employer in return for work performed, often expressed per hour, day, or piece.

Marginal Resource Cost

The additional cost incurred by producing one more unit of a resource or good.

Profitable Hire

An employee whose contributions generate more revenue than the cost of their employment, making them financially beneficial to the company.