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Questions and Answers
A tax creates a difference between the price buyers pay and the price sellers receive.
A tax creates a difference between the price buyers pay and the price sellers receive.
True (A)
When a tax is imposed on sellers, it raises their cost of selling a good.
When a tax is imposed on sellers, it raises their cost of selling a good.
True (A)
A tax on sellers will always result in them receiving more money than before the tax was imposed.
A tax on sellers will always result in them receiving more money than before the tax was imposed.
False (B)
The effects of a tax on price and quantity are the same whether the tax is imposed on buyers or sellers.
The effects of a tax on price and quantity are the same whether the tax is imposed on buyers or sellers.
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Taxes do not affect the quantity of goods bought and sold in a market.
Taxes do not affect the quantity of goods bought and sold in a market.
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Study Notes
Tax Impact on Market
- Taxes create a difference between the price buyers pay and the price sellers receive.
- A tax on sellers raises their cost of selling a good.
- This results in a higher price for buyers and a lower price for sellers.
- Taxes affect the quantity of goods bought and sold in a market, leading to a reduction in the quantity traded.
- The impact on price and quantity is the same, regardless of whether the tax is imposed on buyers or sellers.
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