Use the Figure Below Illustrating the Impact of an Excise

question 135

Multiple Choice

Use the figure below illustrating the impact of an excise tax to answer the following question(s) .
Figure 4-6
-Refer to Figure 4-6. The amount of the actual tax burden paid by consumers and producers is

• A) $1.00 for consumers and $.50 for producers
• B) $1.00 for consumers and $1.00 for producers.
• C) $.25 for consumers and $.75 for producers.
• D) $.50 for consumers and $.50 for producers.

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Definitions:

Price Elasticity

The responsiveness of the quantity of a product demanded to a variation in its price, determined by dividing the percentage variation in the quantity demanded by the percentage modification in the product’s price.

Separate Markets

Economic markets that are distinctly separated by geographical boundaries, preferences, or other factors, preventing the mixing of products or services.

Resold

The action of selling an item or asset that has previously been sold or owned by someone else.

Monopolist's Profits

The earnings a monopolist achieves, which are typically higher than in competitive markets due to the ability to set prices above marginal costs.