When the government taxes the sale of a particular type of good, either the producers of the good receive less profit, or the consumers must pay a higher price for the good, or both. If the consumers must pay a higher price, then they will demand less of that good and more of all other goods.
Q:If the above statements are true, and increased demand for a good leads to a higher price for that good, which of the following statements must also be true?
A: If the price of pencils rises and the government taxes the sale of ballpoint pens, then the producers of pens do not receive less profit.
B: If the government taxes the sale of coconuts and the price of bananas remains constant, then the producers of coconuts receive less profit.
C: If the price of coffee falls and consumers demand more tea, then the government repealed a tax on the sale of tea.
D: If the government taxes the sale of cigarettes and consumers demand more bourbon, then consumers must pay a higher price for cigarettes.
E: If consumers demand more bicycles and the producers of automobiles receive less profit, then the government taxes the sale of automobiles.
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