-The Demand for Bus Service Is Perfectly Elastic at a Price

question 223

Multiple Choice

-The demand for bus service is perfectly elastic at a price of $1.25 a ride. The table above shows the bus company's marginal cost and the marginal social cost of the bus service. If the government levies a tax on bus rides so that the bus company takes into account the marginal social cost, the tax will be ________ a ride.

• A) $0.75
• B) $1.60
• C) $1.25
• D) $3.25

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