Suppose a Tax Is Imposed on a Good

question 359

Multiple Choice

Suppose a tax is imposed on a good. This will

• A) increase the price paid by the buyer and decrease the price received by the seller.
• B) increase the price paid by the buyer but leave the price received by the seller unchanged.
• C) decrease the price received by the seller but leave the price received by the buyer unchanged.
• D) increase the price received by the seller and decrease the price paid by the buyer.

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Definitions:

Subsidy

A financial contribution granted by the government to support or promote economic activities.

Direct Assistance

Support or aid provided directly to individuals, organizations, or countries, often in the form of resources, financing, or services.

Tax Breaks

Financial incentives or discounts in taxation provided by the government to encourage certain activities or investments.

Tariffs

Taxes imposed on imported goods aimed at making them more expensive than similar locally-produced goods to protect domestic industries from foreign competition.