In the Country of Bora Bora, Consumers Buy Large Quantities

question 85

Multiple Choice

In the country of Bora Bora, consumers buy large quantities of alcohol, tobacco, and coffee. Last year, the prices of these goods each increased by 10 percent. The quantities demanded for these goods fell by 10, 3, and 8 percent, respectively. If the government is thinking about imposing a unit tax on one of these goods, which good should they choose to tax to raise the most tax revenue, and why?

• A) Alcohol; because the price elasticity is highest.
• B) Tobacco; because the price elasticity is lowest.
• C) Coffee; because it will have the lowest tax elasticity.
• D) Tobacco; because it will have the highest tax elasticity.
• E) Alcohol; because the burden of taxation would be more even.

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Definitions:

Utilize Control

The practice of managing or employing something effectively to achieve a specific goal or regulate an outcome.

Disease From Bacteria

Illness caused by harmful bacterial infections, which can affect various parts of the body and lead to serious health complications.

Illness From Viruses

A condition or disease caused by the invasion of the body by viruses, leading to a range of symptoms depending on the virus.

Behavioral Factors

Aspects of individuals' actions or behaviors that influence their health, well-being, and risk of diseases.