If the Government Wants to Reduce the Consumption of Water

question 87

Multiple Choice

If the government wants to reduce the consumption of water by 5%, and the price elasticity of demand for water is - 0.4, the government should:

• A) raise the price of water by 0.08%
• B) raise the price of water by 2%
• C) lower the price of water by 0.4%
• D) raise the price of water by 12.5%

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Definitions:

Tax Purposes

The consideration or treatment of transactions, events, or financial situations in relation to calculating tax liabilities.

Dividends

Payments made by a corporation to its shareholder members from the company's earnings.

Earnings

Income generated from a company's business activities over a certain period, often reported as net income.

Face Value

The nominal value or dollar value of a security stated by the issuer.