Asked by Mckay Hilton on Jul 09, 2024
Verified
When the government imposes a specific tax per unit on a product, changes in consumer surplus are ________ and changes in producer surplus are ________.
A) negative; positive
B) positive; positive
C) negative; negative
D) positive; negative
Producer Surplus
The gap highlighting the difference between the initial asking price by sellers for goods or services and the ultimately received price.
Specific Tax
A tax that is levied as a fixed amount per unit on a particular good or service.
- Assess the distribution of tax duties between consumers and producers.
Verified Answer
JG
Jennifer GanbaatarJul 16, 2024
Final Answer :
C
Explanation :
When a specific tax per unit is imposed on a product, both consumer surplus and producer surplus decrease. The tax increases the price paid by consumers and reduces the price received by producers, leading to a loss of surplus for both parties.
Learning Objectives
- Assess the distribution of tax duties between consumers and producers.