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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