A Local Government Is Considering a 10 Percent Tax on Items

question 66

Multiple Choice

A local government is considering a 10 percent tax on items A, B, and C. They want to tax only those goods for which the burden of the tax is lowest on suppliers. They know that the elasticity of supply of all the suppliers in question is about equal and have observed that when the price of A, B, and C rose 10 percent, total sales receipts for A and B rose 2 percent but declined 2 percent for C. From this information, they should:

• A) tax A and B but not C.
• B) tax A, B, and C equally.
• C) tax C but not A and B.
• D) You need to know the volume of sales to determine the answer.

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Definitions:

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A state of feeling unable to control or influence events or outcomes.

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Events or conditions in one's environment that cause stress.

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The body's defense system against infectious organisms and other invaders.