When a Tax Is Imposed on Some Good,the Lost Consumer

question 112

Multiple Choice

When a tax is imposed on some good,the lost consumer surplus and producer surplus both typically end up as

• A) additional revenues for firms.
• B) lower prices for consumers.
• C) more units of output bought and sold.
• D) increased social welfare.
• E) tax revenue and deadweight loss.

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Definitions:

Binding Price Floor

A government or regulatory-imposed price control that sets the minimum price that can be charged for a good or service, above the equilibrium price, leading to potential surpluses.

Surplus

Surplus refers to the amount by which production, resources, or inventory exceeds what is needed or used, often resulting in excess supply.

Nonbinding Price Floor

A minimum price set by the government that is below the equilibrium price, having no effect on the market.

Minimum Wage

The lowest legal hourly wage that employers can pay to workers, set by government regulation.