📚 Learning Guide
Understanding Per-Unit Taxes
hard

Which of the following statements accurately describe the implications of per-unit taxes on market efficiency and production? Select all that apply.

Master this concept with our detailed explanation and step-by-step learning approach

Learning Path
Learning Path

Question & Answer
1
Understand Question
2
Review Options
3
Learn Explanation
4
Explore Topic

Choose the Best Answer

A

Per-unit taxes increase the marginal cost of production, which can lead to a reduction in output.

B

Implementing per-unit taxes guarantees that all producers will reduce their output to the socially efficient level.

C

Per-unit taxes can help internalize negative externalities by aligning marginal private costs with marginal social costs.

D

If per-unit taxes are set too high, they could lead to market distortions and decreased overall welfare.

E

Per-unit taxes do not affect consumer prices or demand for the taxed goods.

Understanding the Answer

Let's break down why this is correct

Answer

Per-unit taxes are fees that the government charges for each unit of a product sold. When these taxes are imposed, they increase the cost of production for businesses, which can lead to higher prices for consumers. This change can reduce the number of goods sold in the market, making it less efficient because fewer trades occur than would happen without the tax. For example, if a soda company has to pay a tax for every can sold, they might raise prices, causing some customers to buy less soda. Overall, per-unit taxes can create a gap between what consumers are willing to pay and what producers are willing to sell, leading to a decrease in total market efficiency.

Detailed Explanation

Other options are incorrect because This statement suggests that taxes always lead to less production; This implies that taxes force all producers to make the same choices.

Key Concepts

Per-Unit Taxes
Marginal Cost and Social Efficiency
Negative Externalities
Topic

Understanding Per-Unit Taxes

Difficulty

hard level question

Cognitive Level

understand

Ready to Master More Topics?

Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.