Consumers Will Lose No Consumer Surplus Due to a Tax

question 15

Multiple Choice

Consumers will lose no consumer surplus due to a tax if demand in their market is perfectly elastic because

• A) consumers can effortlessly change their behavior in response to the tax.
• B) firms will decide not to pay the tax to the government.
• C) the government will decide to tax something else.
• D) the amount of the tax is relatively low.
• E) producers can effortlessly change their behavior in response to the tax.

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Definitions:

Price-fixing

An illegal agreement among competitors to maintain prices at a certain level, preventing the forces of competition from dictating market prices.

Sherman Act

The federal antitrust law of 1890 that makes monopoly and conspiracies to restrain trade criminal offenses.

Federal Energy Regulatory Commission

The Federal Energy Regulatory Commission (FERC) is a U.S. government agency that regulates the interstate transmission of electricity, natural gas, and oil.

U.S. Justice Department

The federal executive department responsible for overseeing the enforcement of federal laws, including antitrust law, civil rights, and criminal law.