Consider a perfectly competitive market with our usual downward sloping demand and upward sloping supply curves. The market has a $2 per-unit tax that consumers pay. This tax is decreased to a $1 per-unit tax. Which of the statement is TRUE about the market equilibrium with the lower $1 tax. O Consumer surplus decreases because market price rises. O Tax revenues increase. O Tax revenues decrease.

Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter13: Firms In Competitive Markets
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Consider a perfectly competitive market with our usual downward sloping demand and upward sloping supply curves. The market has a $2 per-unit tax that consumers
pay. This tax is decreased to a $1 per-unit tax. Which of the statement is TRUE about the market equilibrium with the lower $1 tax.
O Consumer surplus decreases because market price rises.
O Tax revenues increase.
O Tax revenues decrease.
O Producer surplus increases.
Transcribed Image Text:Consider a perfectly competitive market with our usual downward sloping demand and upward sloping supply curves. The market has a $2 per-unit tax that consumers pay. This tax is decreased to a $1 per-unit tax. Which of the statement is TRUE about the market equilibrium with the lower $1 tax. O Consumer surplus decreases because market price rises. O Tax revenues increase. O Tax revenues decrease. O Producer surplus increases.
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