In the diagram, D represents the demand curve for cigarettes, S represents the supply curve, and MSC represents the marginal social cost curve. When a specific tax is imposed on cigarettes, the supply curve moves to S1. What effects is the tax likely to have on economic efficiency and on the tax system?
- Aeconomic efficiency improves; tax system becomes less regressive
- Beconomic efficiency improves; tax system becomes more regressive
- Ceconomic efficiency worsens; tax system becomes less regressive
- Deconomic efficiency worsens; tax system becomes more regressive