Suppose that government imposes a specific excise tax on product X of $2 per unit and that the price elasticity of demand for X is unitary (coefficient = 1). If the incidence of the tax is such that the producers of X pay $1.75 of the tax and the
consumers pay $.25, we can conclude that the:
A. supply of X is highly inelastic.
B. supply of X is highly elastic.
C. demand for X is highly inelastic.
D. demand for X is highly elastic.
Answer: A
You might also like to view...
When a bank takes money that you put in your checking account and gives it to someone else, at a cost, for a period of time, it is said to be
A) making a loan. B) making a deposit. C) internalizing an externality. D) creating commodity money.
An asset that derives its value from some other underlying asset is a
A) stock. B) bond. C) derivative. D) CD.
If a firm pays all transportation costs and it is very costly to transport the inputs, but relatively inexpensive to transport the final product, the cost-minimizing location for the plant will be closer to the ________ and farther away from the ________.
A) customers; distributors B) customers; inputs C) distributors; customers D) inputs; customers
The existence of the Federal Savings and Loan Insurance Corporation (FSLIC) reduced the number of S&L failures in the 1980s and 1990s
Indicate whether the statement is true or false