Answer:
Closer to the competitive equilibrium, thereby reducing social efficiency.
Explanation:
The market is not failed itself, so there is no need of taxes to clear it but to arrange revenue for government taxes some of the luxurious products the tax shifts supply curve to left and decrease equilibrium quantity which makes the dead weight loss in the market and the quantity get away from the efficient level.
In absence of market failures, when the government taxes market participants, the effect is to move the market :
Answer: C beyond a certain point, total utility decreases as income rises
- Diminishing marginal utility means that beyond certain point, the total utility from consuming a good decreases, and increasing its consumption monotonically, makes that every additional unit of consumption delivers less utility each time.
- This is because most behavioral consumers models try to emulate the principle of scarcity: the less available units of a good, the more it values.
- Then, an increasing income would allow us to buy more and more goods, and because of the existance of diminishing marginal utility, we would get less utility from consuming additional units of every goods each time.
- As an <u>example</u>,one could think about eating chocolate. The first bar would give us much happiness (utility), but increasing the number of bars consumed would eventually vanish this "happiness".
