What happens to the market when a tax is imposed on a product?

Multiple choice question for Prices, Wages & Taxes. Select an option, then review the explanation below.

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Buyers pay less, sellers receive more, and the quantity traded declines.Buyers pay more, sellers receive less, and the quantity sold rises.Buyers pay less, sellers get more, and the amount sold increases.Buyers pay a higher price, sellers get a lower price, and the quantity sold falls.

Explanation

When a tax is levied on a good, the price that buyers pay increases while the amount sellers receive decreases, resulting in a reduction in the quantity sold.

Practice related questions from the same subject.

1.Which statement accurately describes how the tax burden is allocated?
2.When a tax is imposed on an essential product, who is most likely to bear the majority of the tax burden?
3.If a tax is imposed on buyers in a market, what is the effect on the distribution of the tax burden?
4.In the supply and demand framework, when a tax is imposed on sellers of a product, which curve shifts and in what direction?
5.Which type of employee is most likely to face greater challenges in securing employment following an increase in the minimum wage?

What happens to the market when a tax is imposed on a product?

Explanation

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