Which of the following scenarios best illustrates the trade-off between market efficiency and horizontal equity when a government imposes a tax on a good?

When a government imposes a tax on a good, it can create a situation where market efficiency and horizontal equity are in conflict. Market efficiency refers to how well resources are allocated to maximize overall benefit, while horizontal equity means that people in similar situations should be treated equally. For example, if the government taxes soda to discourage consumption for health reasons, this may reduce soda sales, which can harm businesses and their employees, leading to inefficiencies in the market. However, if the tax is used to fund public health programs that benefit everyone equally, it promotes horizontal equity. Thus, while the tax might help achieve a social goal, it can also disrupt market efficiency and create a deadweight loss, meaning some economic activity is lost because of the tax.