Suppose the Equilibrium Price of Textbooks Is $40 a Textbook

question 86

Multiple Choice

Suppose the equilibrium price of textbooks is $40 a textbook. At that price, the quantity of textbooks demanded and supplied is 20,000. If a $5 tax per textbook paid by consumers increases the price paid by consumers to $42 a textbook and reduces the equilibrium quantity sold to 18,000, elasticity of:

• A) demand is 1.3 and elasticity of supply is 2.0. Consumers pay a larger portion of the tax.
• B) demand is 0.7 and elasticity of supply is 0.5. Consumers pay a smaller portion of the tax.
• C) supply is 1.3 and elasticity of demand is 2.0. Suppliers pay a larger portion of the tax.
• D) supply is 0.7 and elasticity of demand is 0.5. Suppliers pay a smaller portion of the tax.

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Definitions:

Humans

Members of the species Homo sapiens, characterized by their ability to create complex language, culture, and utilize advanced tools.

Sounds

Oscillations that pass through air or a different medium and are perceived when they make contact with an individual's or creature's ear.

Basic Tastes

The human tongue's primary taste sensations which include sweet, sour, salty, bitter, and umami.

Citrus

Citrus refers to a genus of flowering trees and shrubs that produce fruit with a high vitamin C content, such as lemons, limes, oranges, and grapefruits.