b . can result in price changes but does not prevent prices from simultaneously being equal to MSB and MSC .
c . results in substitution effects that change prices . d . results in both substitution effects and income effects that change prices .
2 . The current price of compact discs , which are traded in perfectly competitive markets , is $ 10 . A $ 1 per unit tax is levied on the discs . Annual record sales decline from five million to four million as a result of the tax . Assuming that the income effect of the tax-induced price change is negligible , the excess burden of the tax will be :
a . $ 500,000 per year . b . $ 1 million per year .