Question

In the absence of market failures, when the government taxes market participants, the effect is to move the market: Group of answer choices away from the competitive equilibrium, thereby enhancing social efficiency. closer to the competitive equilibrium, thereby enhancing social efficiency. closer to the competitive equilibrium, thereby reducing social efficiency. away from the competitive equilibrium, thereby reducing social efficiency.

Answer 1

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 :