Which of the Following Statements About the Effects of a Tax

question 71

Multiple Choice

Which of the following statements about the effects of a tax on a good is true?

• A)A 10-cent tax charged to a merchant for every bag of potato chips the merchant sells is paid entirely by the merchant.
• B)When price elasticity of supply is very high, the deadweight loss from a per-unit tax on a good is relatively low.
• C)When price elasticity of demand is very low, the deadweight loss from a per-unit tax on a good is relatively high.
• D)The greater the price elasticity of demand for a good, the greater the cost to society of a tax on that good.
• E)A $1,000 tax imposed on car dealers for every car sold will cause the prices of cars to rise $1,000.

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Definitions:

Labor Surplus

A situation in which the supply of workers exceeds the demand for their services, often leading to unemployment and lower wages.

Economic Depression

A long-term downturn in economic activity characterized by high unemployment, low consumer spending, and business failures.

Pre-Industrial Artisan

A skilled craftsperson who manually produces goods or provides services, traditionally working within a small-scale, labor-intensive process prior to industrialization.

New England Farm Daughters

Refers to young women who lived and worked on farms in the New England region of the United States, particularly significant during the 18th and 19th centuries for their role in the agricultural economy.