The Introduction of a Tax in a Perfectly Competitive Marketplace

question 127

True/False

The introduction of a tax in a perfectly competitive marketplace that is originally in equilibrium will lower total surplus.

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Definitions:

Subnormal Activity

Activities or economic conditions below the standard or average level, often indicative of a slowdown or recession.

John Maynard Keynes

A British economic thinker whose insights led to significant shifts in macroeconomic practices and the economic approaches of governments.

Economy

The organized system of human activity involved in the production, consumption, and trading of goods and services.

Say's Law

An economic principle that suggests supply creates its own demand, meaning production of goods and services generates the purchasing power needed to buy those goods and services.