In Order to Discourage Consumers from Consuming Sugary Soft Drinks

question 63

Multiple Choice

In order to discourage consumers from consuming sugary soft drinks, the government is considering placing a tax on sugary soft drink sales. Which of the following statements is true?

• A) Given the numerous alternatives, consumers' demand for sugary soft drinks is relatively elastic and the tax will likely work to discourage sugary soft drink consumption.
• B) The tax on sugary soft drinks will likely raise considerable revenue, but will be unlikely to reduce the consumption of sugary soft drinks by consumers.
• C) The tax on sugary soft drinks will likely decrease the demand for sugar-free soft drinks.
• D) Taxes do not discourage consumers from consuming products.

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Definitions:

Marginal Cost

The escalation in total expenses incurred from creating an additional unit of a product or service.

Excess Capacity

The situation where a firm has resources that are not being fully utilized, often leading to inefficiency and increased costs.

Monopolistic Competitor

A market structure where many firms sell products that are similar but not identical, allowing them some power to set prices due to product differentiation.

Advertising

The activity or profession of producing advertisements for commercial products or services.