When a Tax Is Imposed on Some Good,what Happens to the Amount

question 49

Multiple Choice

When a tax is imposed on some good,what happens to the amount of the good bought and sold?

• A) It increases.
• B) It decreases.
• C) It decreases,but only if the tax is imposed on producers.
• D) It decreases,but only if the tax is imposed on consumers.
• E) It increases,but only if the tax is imposed on consumers.

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Definitions:

Substitution Effect

The economic understanding that as prices rise or incomes decrease, consumers replace more expensive items with less costly alternatives.

Output Effect

The change in total output resulting from a specific economic policy or condition, such as an increase in demand.

MRP

Marginal Revenue Product, the additional revenue generated by the employment of one additional unit of a factor of production.

MPP

Marginal Physical Product, the change in total output of a good that results from a one-unit change in input, holding all other inputs constant.