If a Per-Unit Tax Is Imposed on Producers in a Market

question 190

Multiple Choice

If a per-unit tax is imposed on producers in a market that is in equilibrium,the more inelastic demand is,the

• A) smaller the deadweight loss.
• B) larger the deadweight loss to producers.
• C) smaller the deadweight loss to consumers.
• D) larger the deadweight loss.
• E) less likely the deadweight loss will be affected.

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Definitions:

Economic Profit

The contrast between a company's overall receipts and its full charges, considering both palpable and inferred costs.

Long Run

A time period in economics during which all factors of production and costs are variable, allowing for all adjustments to be made to achieve an equilibrium.

Competitive Increasing-cost Industry

An industry in which the entry of new firms causes the input prices to increase, leading to upward-sloping supply curves for the firms.

Long-run Equilibrium

A state in economics where all factors of production are fully adjusted to the market condition and all economic agents have no incentive to change their behavior.