Economics (AS & A Level) · Oct / Nov 2021 · Paper 11 · Question 12
9708Methods and effects of government intervention in markets
The diagram shows the demand curve and supply curve for a good on which the government imposes a specific tax. What will be the result of this tax?
- AMost of the incidence of the tax will fall on the producer.
- BThere will be a new demand curve parallel to DD.
- CThe price will rise by the full amount of the tax.
- DThe quantity bought will fall proportionately to the tax rate.
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Correct answer: A. Most of the incidence of the tax will fall on the producer.
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