For this question, suppose the market for widgets is perfectly competitive and the government introduces a per-unit $1 tax on widgets. Post-tax, quantity of widgets sold in market equals 100. Which of the following is true? A. Reduction in producer surplus due to imposition of tax definitely equals 100 B. Reduction in producer surplus due to imposition of tax certainly equals 100 when the tax is collected from producers, but not when it is collected from consumers. C. Reduction in consumer surplus is definitely smaller than 100. D. Tax revenue is more than 100. E. None of the above.

For this question, suppose the market for widgets is perfectly competitive and the government introduces a per-unit $1 tax on widgets. Post-tax, quantity of widgets sold in market equals 100. Which of the following is true? A. Reduction in producer surplus due to imposition of tax definitely equals 100 B. Reduction in producer surplus due to imposition of tax certainly equals 100 when the tax is collected from producers, but not when it is collected from consumers. C. Reduction in consumer surplus is definitely smaller than 100. D. Tax revenue is more than 100. E. None of the above.

Principles of Economics, 7th Edition (MindTap Course List)

7th Edition

ISBN:9781285165875

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter8: Application: The Cost Of Taxation

Section: Chapter Questions

Problem 8PA

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