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:

Bodily Arousal

A state of physiological activation or readiness, often associated with emotions, stress, or excitement, involving changes in heart rate, blood pressure, and respiration.

Autonomic Nervous System

The component of the nervous system that regulates involuntary bodily functions, including respiration, cardiac rhythm, and digestion activities.

Somatic Nervous System

The part of the peripheral nervous system that controls voluntary movements of the body and transmits sensory information to the central nervous system.

Neurons

Specific cell types in the nervous system responsible for conveying information through chemical and electrical signals.