How Successful Would a $1 Excise Tax on Each Little

question 152

Multiple Choice

How successful would a $1 excise tax on each Little Caesar's pizza be in generating revenue if Little Caesar's is the only pizza chain that is taxed?

• A) Many people like Little Caesar's,so demand is inelastic and the tax revenue generated will be large.
• B) You can get pizza at many other places,which makes the demand for Little Caesar's relatively elastic and,as a result,the tax revenue collected will be small.
• C) The supply of Little Caesar's pizza is perfectly inelastic,so this tax would not generate any revenue.
• D) The demand for Little Caesar's pizza is perfectly elastic,so the tax will not generate any revenue.
• E) The supply of Little Caesar's pizza is perfectly elastic,so this tax will generate the maximum amount of revenue.

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