QuestionJuly 20, 2025

The government wants to transfer welfare from buyers to sellers by collecting a 1 tax on a good from buyers and subsidizing sellers 1 for each unit of the good sold. This policy will: decrease the equilibrium price. increase the equilibrium price. decrease the equilibrium quantity. increase the equilibrium quantity.

The government wants to transfer welfare from buyers to sellers by collecting a 1 tax on a good from buyers and subsidizing sellers 1 for each unit of the good sold. This policy will: decrease the equilibrium price. increase the equilibrium price. decrease the equilibrium quantity. increase the equilibrium quantity.
The government wants to transfer welfare from buyers to sellers by collecting a 1
tax on a good from buyers and subsidizing sellers 1 for each unit of the good sold.
This policy will:
decrease the equilibrium price.
increase the equilibrium price.
decrease the equilibrium quantity.
increase the equilibrium quantity.

Solution
4.1(256 votes)

Answer

Decrease the equilibrium price; Increase the equilibrium quantity. Explanation 1. Analyze the effect of tax on buyers A \ 1 tax on buyers effectively increases the price they pay, reducing demand. 2. Analyze the effect of subsidy on sellers A \ 1 subsidy to sellers effectively decreases their cost, increasing supply. 3. Determine equilibrium changes The decrease in demand and increase in supply will lead to a lower equilibrium price and higher equilibrium quantity.

Explanation

1. Analyze the effect of tax on buyers<br /> A $\$ 1$ tax on buyers effectively increases the price they pay, reducing demand.<br />2. Analyze the effect of subsidy on sellers<br /> A $\$ 1$ subsidy to sellers effectively decreases their cost, increasing supply.<br />3. Determine equilibrium changes<br /> The decrease in demand and increase in supply will lead to a lower equilibrium price and higher equilibrium quantity.
Click to rate:

Similar Questions