A Specific Tax Will Be Imposed on a Good

question 91

Multiple Choice

A specific tax will be imposed on a good. The supply and demand curves for the good are shown in the diagram below. Given this information, the burden of the tax:

• A) is shared about evenly between consumers and producers.
• B) falls mostly on consumers.
• C) falls mostly on producers.
• D) cannot be determined without more information on the price elasticities of supply and demand.

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Definitions:

Unconscionably High Rates

Charges or fees that are excessively high and considered unreasonable or unethical, often in the context of lending or service provision.

Usury

The practice of charging exorbitantly high or illegal interest rates on loans.

Usury Law

Legislation that sets maximum interest rates that can be charged on loans, designed to protect consumers from excessively high rates.

Interest Rate

The Interest Rate is the percentage at which interest is paid by borrowers for the use of money they borrow from a lender, commonly expressed as an annual percentage.