If the Government Wanted to Reduce Alcohol Consumption in the United

question 100

Multiple Choice

If the government wanted to reduce alcohol consumption in the United States, would a state tax or federal tax be most effective?

• A) A state tax on alcohol consumption would be more effective because state taxes affect more buyers.
• B) A state tax on alcohol consumption would be more effective because the elasticity of demand is higher at the state level than at the federal level.
• C) A federal tax on alcohol consumption would be more effective because the elasticity of demand is higher at the federal level than at the state level.
• D) A federal tax on alcohol consumption would be more effective because suppliers cannot as easily avoid the tax simply by shipping alcohol to other states.

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Definitions:

Money Income

Money Income is the total amount of monetary earnings received by an individual or household, including wages, salaries, benefits, and other income sources, over a specific period of time.

Price

The sum of money that is anticipated, demanded, or paid in exchange for something, representing the value of goods or services in financial terms.

Indifference Curves

represent combinations of two goods that provide the same level of utility or satisfaction to a consumer, illustrating their preferences.

Budget Constraints

The limitations on the consumption bundles that a consumer can afford given their income and the prices of goods and services.