Consider a 10- Percent Excise Tax That Is Similarly Applied

question 79

Multiple Choice

Consider a 10- percent excise tax that is similarly applied to good X, which has a price elasticity of 2.7, and to good Y, that has a price elasticity of 0.6. We can predict that the excess burden of this tax in the market for good X will be the excess burden in the market for good Y.

• A) no larger than
• B) 2.1 times the size of
• C) smaller than
• D) equal to
• E) larger than

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Definitions:

Direct Relationship

A relationship where one variable increases or decreases along with the other, showing a positive correlation between the two variables.

Amount

A quantity of something, typically measurable.

Time Studying

The allocation of time towards educational activities with the aim of learning and understanding new information or skills.

Annual Income

The total amount of money earned by an individual or household in one year, from all sources.