1. When the government places a tax on a good and all else is held constant, whi

ID: 1136010 • Letter: 1

Question

1. When the government places a tax on a good and all else is held constant, which of the following would most likely happen?

The government receives no tax revenue if the tax is more than 20%.

The price and quantity adjust back to the competitive market equilibrium point.

The supply curve shifts to the right.

The overall consumption of the good decreases, assuming the good does not have a vertical demand curve.

The price the buyer pays for the good decreases, assuming the good does not have a horizontal demand curve.

Option d.

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