Scenario 8.2: Yachts Are Produced by a Perfectly Competitive Industry in Dystopia

question 149

Multiple Choice

Scenario 8.2:
Yachts are produced by a perfectly competitive industry in Dystopia. Industry output (Q) is currently 30,000 yachts per year. The government, in an attempt to raise revenue, places a $20,000 tax on each yacht. Demand is highly, but not perfectly, elastic.
-Refer to Scenario 8.2. The more elastic is demand for yachts,

• A) the more Q will fall and the more P will rise.
• B) the less Q will fall and the more P will rise.
• C) the more Q will fall and the less P will rise.
• D) the less Q will fall and the less P will rise.
• E) the closer is the new equilibrium point to the old.

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