Although governments can collect tax revenue in the form of a per unit tax on output, this creates inefficiency known as deadweight loss because
(a) the price consumers pay and producers receive is identical to the equilibrium price
(b) governments use this tax revenue to increase spending which creates an incentive for business to produce
(c) governments force consumers to pay higher prices
(d) the market is no longer in equilibrium

The answer is: (C) governments force consumers to pay higher prices.

Explanation:

The fall in the total surplus resulting when a tax distorts market results is called deadweight loss.

The distortion that taxes produce in incentives causes the market to distribute resources inefficiently.

Thus, when a tax increases the price to buyers and reduces the price to sellers, it provides the former with an incentive to consume less and the latter an incentive to produce less than they would in the absence of the tax.

The answer is: (C) governments force consumers to pay higher prices.

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