When Taxes Are Imposed on a Commodity

question 321

Multiple Choice

When taxes are imposed on a commodity,

• A)there is never a deadweight loss.
• B)some consumers alter their consumption by not purchasing the taxed commodity.
• C)tax revenue will rise by the amount of the tax multiplied by the before-tax level of consumption.
• D)the taxes do not distort incentives.

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Definitions:

Normal Good

A good for which demand increases as consumer income rises, holding all other factors constant.

Consumer Tastes

Preferences and inclinations of consumers that influence their purchasing behavior and choice of products.

Substitutes

Products or services that can replace each other in usage, providing consumers with choices.

Health Clubs

Facilities that offer a variety of exercise equipment, classes, and services to individuals looking to improve or maintain their physical fitness.