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What is the impact of a production tax on the equilibrium​ price? The equilibrium price A. falls and the equilibrium quantity rises. B. rises and the equilibrium quantity rises. C. rises and the equilibrium quantity falls. D. falls and the equilibrium quantity falls.

User TJC
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Answer:

The answer is: C. rises and the equilibrium quantity falls.

Step-by-step explanation:

The impact of a production tax on the equilibrium price will be that it increases and the equilibrium quantity decreases.

A tax increases the price a buyer pays for a product, so if the price is higher, then the quantity demanded will be lower.

It doesn´t matter if the tax is levied upon the supplier or the buyer, since the result will be the same, a higher price for the product. The buyer only cares for the total price he or she pays (including taxes) and the producer only cares about the net revenue they get from a sale (discounting taxes).

User Pasosta
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