Given the Choice Between a Lump- Sum Tax and an Excise

question 70

Multiple Choice

Given the choice between a lump- sum tax and an excise tax that raises the same revenue, a consumer:

• A)will be hard- pressed to choose one option over the other.
• B)will choose the the excise tax.
• C)will choose the lump- sum tax.
• D)is indifferent between the two.

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Definitions:

Price Increase

A rise in the cost of goods or services, affecting consumption patterns and inflation rates.

Elasticity

A measure of the responsiveness of quantity demanded or supplied to a change in one of its determinants, such as price or income.

Consumer Expenditure

The total amount spent by consumers on goods and services within a specific period.

Demand Curves

illustrate the relationship between the price of a good and the quantity demanded, typically showing a downward slope indicating that demand decreases as price increases.