The government imposes a unit excise tax on bubble gum. What happens as a result?
A) The equilibrium quantity of bubble gum increases.
B) At the original market price, there will be a bubble gum surplus so price decreases.
C) At the original market price, there is a bubble gum shortage and so price rises.
D) There will be no change in either the market price or equilibrium quantity as long as the excise tax rate is 5 percent or less.
Answer: C
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