Taxing Goods with Very Inelastic Demand Generates Less Deadweight Loss

question 39

Multiple Choice

Taxing goods with very inelastic demand generates less deadweight loss than taxing goods with very elastic demand because

• A) the change in consumer behavior is smaller.
• B) the amount of the tax is larger.
• C) consumers have to pay these taxes out of pocket.
• D) the government does not bother collecting the revenue.
• E) the change in consumer behavior is greater.

Apply the concept of opportunity costs and sunk costs to business decisions.

Evaluate the effects of entry and exit of firms in a perfectly competitive market on economic profits and resource allocation.

Understand the implication of limited resources on market supply and firm profitability.

Grasp the long-run adjustments of firms to changes in demand, supply, and cost conditions.

---

Definitions:

Data

The systematic information that sociologists use to investigate research questions.

Grant Money

Financial funds provided by a government, organization, or individual for a specific purpose, which do not require repayment.

Serendipitous

Characterized by the occurrence of discoveries or events in a happy or beneficial way by accident or chance.

Research Finding

The outcome or results derived from systematic investigation or study in a specific area of knowledge or inquiry.