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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