In a Perfectly Competitive Market, Which of the Following Will

question 52

Multiple Choice

In a perfectly competitive market, which of the following will not occur as a result of an excise tax?

• A)The market will under-produce relative to the efficient level.
• B)Consumer surplus will be higher than with no tax since the tax is imposed on suppliers.
• C)Producer surplus will be lower than with no tax.
• D)The tax causes a deadweight loss.

---

Definitions:

Future Value

The value of a current asset at a specified date in the future based on an assumed rate of growth.

Market Rate

The prevailing interest rate available in the marketplace for loans, savings, and investments, often determined by the forces of supply and demand.

Expected Profit

The anticipated financial gain from a business venture or investment, considering both potential risks and rewards.

Current Cost

The cost of purchasing an asset or service at the present time, considering the most recent market values.