A government imposes an indirect tax on a product with normal demand and supply curves. The tax raises $100 million.
What effect will the tax have on the value of the combined consumer surplus and producer surplus?
1 )
It will be unaffected.
2 )
It will fall by less than $100 million.
3 )
It will fall by exactly $100 million.
It will fall by more than $100 million.
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