If the Absolute Value of the Tax Elasticity of Supply

question 78

Multiple Choice

If the absolute value of the tax elasticity of supply is 0.5,a tax increase of 10 percent will

• A)Increase output by 5 percent and decrease tax revenues.
• B)Increase output by 20 percent and decrease tax revenues.
• C)Decrease output by 5 percent and increase tax revenues.

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Definitions:

Competitive Price-searcher

A market participant who actively seeks out the best price for goods or services among various competitors.

Product Variety

Product variety refers to the assortment of different goods and services that a company offers to meet varying customer needs and preferences.

Higher Prices

A scenario where the cost of goods or services rises, which can be due to increased demand, reduced supply, or inflation.

Economic Profits

The difference between total revenue and total costs, including both explicit and implicit costs, indicating the financial gain exceeding the opportunity costs.