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