Provincial Governments Across Canada Recently Started Legalizing and Then Heavily

Provincial governments across Canada recently started legalizing and then heavily taxing gambling at casinos. The new taxes are lower than the cost of breaking the law was to the sellers of the previously illegal casino services. The costs of breaking the law to the buyers of these services also fell to zero. This change will likely lead to

A) a rise in the equilibrium price, and a decrease in the equilibrium quantity.
B) a rise in the equilibrium price, and an increase in the equilibrium quantity.
C) a fall in the equilibrium price, and an increase in the equilibrium quantity.
D) a fall in the equilibrium price, and a decrease in the equilibrium quantity.
E) an unknown change in equilibrium price and equilibrium quantity.

Correct Answer:

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