Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It increases government revenue without affecting market equilibrium.
B
It decreases government revenue and disrupts market equilibrium.
C
It increases government revenue and potentially disrupts market equilibrium.
D
It has no effect on government revenue or market equilibrium.
Understanding the Answer
Let's break down why this is correct
Answer
A per-unit tax is a fee that the government charges for each unit of a product sold. When this tax is imposed, the cost of producing or selling that product increases, which can lead to higher prices for consumers. As a result, the market equilibrium, where supply and demand meet, shifts. For example, if a tax of $2 is added to a drink, the price might rise from $5 to $7, causing some consumers to buy less. While the government collects more revenue from the tax, the overall quantity of the product sold in the market may decrease, affecting both producers and consumers.
Detailed Explanation
A per-unit tax means the government collects money for each item sold. Other options are incorrect because Some might think a tax only raises money without changing anything else; This answer suggests that taxes lower government money.
Key Concepts
government revenue implications
market equilibrium disruption
Topic
Understanding Per-Unit Taxes
Difficulty
medium level question
Cognitive Level
understand
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