In the Case of a Per-Unit Tax on a Good

question 9

Multiple Choice

In the case of a per-unit tax on a good, which of the following situations will lead to the greatest change in price?

• A)Supply and demand are relatively inelastic.
• B)Supply and demand are relatively elastic.
• C)Demand is relatively elastic and supply is relatively inelastic.
• D)Demand is relatively inelastic and supply is relatively elastic.
• E)Both supply and demand do not exist.

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Definitions:

Actual Quantity

The real number of units used or produced, as opposed to planned or estimated quantities.

Overhead Budget

An estimation of all overhead costs for a period, helping businesses plan how much they need to spend on indirect costs.

Budgeted Overhead Cost

The forecasted or estimated costs of overhead that a company plans to incur over a period, factored into its budgeting process.

Machine-Hours

A measure of production time, referring to the number of hours machines are run to produce goods.