Which statement aligns with the effects of taxes on market activity?

The statement that taxes may lead to a decrease in economic welfare is accurate as it reflects the broader economic principle known as the "deadweight loss." When taxes are imposed on goods and services, they change the price that consumers pay and the revenue that producers receive. This can lead to a reduction in the quantity of goods traded in the market compared to a scenario without taxes.

When the market is not operating at its most efficient level due to taxes, it results in what economists call a deadweight loss, which signifies a loss of economic efficiency. Essentially, both consumers and producers may be worse off as a result of the tax — consumers face higher prices while producers earn lower effective prices after tax. The overall economic output can decrease, resulting in a loss of welfare within the economy.

In contrast, while taxes do generate government revenue, this does not inherently equate to an increase in overall economic welfare. Furthermore, taxes are unlikely to encourage more market transactions or lead to reduced prices for consumers, as they generally work in the opposite direction by raising costs and disincentivizing participation in the market.