If a $2 Tax on Cigarettes Decreases Both Consumer and Producer

question 41

Multiple Choice

If a $2 tax on cigarettes decreases both consumer and producer surplus:

• A) tax revenues will exactly equal the amount of the lost consumer and producer surplus.
• B) tax revenues will be less than the amount of the lost consumer and producer surplus.
• C) tax revenues will be more than the amount of the lost consumer and producer surplus.
• D) there will be no deadweight loss.

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