A Tax on an Industry with a Perfectly Inelastic Supply

question 17

Multiple Choice

A tax on an industry with a perfectly inelastic supply curve will generate a dead weight loss:

• A)lower than the consumer's surplus.
• B)equal to zero.
• C)equal to the sum of consumer surplus and producer surplus.
• D)greater than the consumer's surplus.

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Definitions:

Vertical Analysis

A method of financial statement analysis in which each entry for each of the three major categories of accounts (or assets, liabilities, and equity) is represented as a proportion of the total account.

Net Income

The total earnings of a company after accounting for all expenses and taxes; also known as net profit.

Net Sales

represents the amount of sales revenue remaining after deducting returns, allowances for damaged goods, and discounts.

Percentage Increase

A mathematical calculation that determines the degree of growth of a figure or value in comparison to its original amount, expressed as a percentage.