Which of the following is a benefit from imposing a tax on a good or service?

• A. Ensuring that the market price equals the marginal cost
• B. Increasing consumer surplus for buyers of the taxed good
• C. Eliminating deadweight loss in the market
• D. Generating government revenue to fund public goods and services

Answer: (D)

Verified step by step guidance

1. Understand the role of taxes in microeconomics: Taxes are often imposed on goods or services to generate government revenue, correct market failures, or redistribute resources.
2. Analyze the options given: Taxes do not typically ensure that market price equals marginal cost; in fact, taxes usually create a wedge between price paid by consumers and price received by producers.
3. Recognize that taxes generally reduce consumer surplus because they increase the price buyers pay, so increasing consumer surplus is unlikely to be a benefit of taxation.
4. Identify that taxes often create deadweight loss by reducing the quantity traded below the efficient market equilibrium, so eliminating deadweight loss is not a benefit of imposing a tax.
5. Conclude that one clear benefit of imposing a tax is generating government revenue, which can be used to fund public goods and services, an important function in microeconomics.