Consumers Will Bear a Larger Burden of an Excise Tax

question 87

Multiple Choice

Consumers will bear a larger burden of an excise tax if

• A) demand is relatively elastic and supply is relatively inelastic.
• B) the tax is collected by firms rather than remitted directly to the government by consumers.
• C) both demand and supply are relatively elastic.
• D) both demand and supply are relatively inelastic.
• E) demand is relatively inelastic and supply is relatively elastic.

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Definitions:

Dividend

A portion of a company's earnings distributed to its shareholders, usually in the form of cash payments or additional shares.

Inflation

The rate at which the general level of prices for goods and services is rising.

Holding-Period Return

The total return received from holding an asset or portfolio of assets over a period of time, considering both price appreciation and dividends or interest.