APFIVE Per-Unit Tax and Allocative Efficiency
A perfectly competitive wheat market is in long-run equilibrium. If the government imposes a $2 per unit tax on producers, which statement is MOST accurate regarding allocative efficiency?
A
Allocative efficiency is lost as P no longer equals MC
B
Allocative efficiency remains as firms adjust output
C
Allocative efficiency improves as government revenue increases
D
Allocative efficiency is unchanged as P still equals MB
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