If the Government Increases the Excise Tax on Cigarettes by 10%,which

question 164

Multiple Choice

If the government increases the excise tax on cigarettes by 10%,which of the following statements is correct?

• A)The government's tax revenue will fall since the demand for cigarettes is inelastic.
• B)The quantity demanded of cigarettes will fall by more than 10% because the demand is inelastic.
• C)Both the quantity demanded and supplied of cigarettes will fall by more than 10% because the demand is inelastic.
• D)Since the demand for cigarettes is highly inelastic,the subsequent increase in price will be greater than the decrease in quantity demanded.

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Definitions:

Extraction Costs

The expenses associated with removing natural resources from the earth, such as mining for metals or drilling for oil.

User Costs

The cost of using a product or service, not just its purchase price but including maintenance, operating, and opportunity costs.

Renewable Resources

Natural resources that can be replenished over short periods of time, such as solar energy, wind, and biomass.

Harvest Rates

The quantity or percentage of a natural resource that is removed or harvested from its source within a certain time period.