Ceteris Paribus, in the Long Run, a Tax Placed on a Perfectly

question 66

Multiple Choice

Ceteris paribus, in the long run, a tax placed on a perfectly competitive industry will

• A)increase the price of the good by an amount equal to the tax.
• B)increase the price of the good by an amount less than the tax.
• C)be borne entirely by the firm.
• D)be entirely borne by the consumer.

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Definitions:

Equilibrium Price

The equilibrium price is the market price at which the supply of an item equals its demand, leading to stable market conditions.

Market Imbalances

Situations where the quantity supplied of a good does not equal the quantity demanded, leading to surpluses or shortages.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a given price.

Market Equilibrium

The state in economics where the supply of goods matches demand, leading to stable prices.