Suppose a Tax Is Imposed on Baseball Bats

question 37

Multiple Choice

Suppose a tax is imposed on baseball bats.In which of the following cases will the tax cause the equilibrium quantity of baseball bats to shrink by the smallest amount?

• A)The response of buyers to a change in the price of baseball bats is strong,and the response of sellers to a change in the price of baseball bats is weak.
• B)The response of sellers to a change in the price of baseball bats is strong,and the response of buyers to a change in the price of baseball bats is weak.
• C)The response of buyers and sellers to a change in the price of baseball bats is strong.
• D)The response of buyers and sellers to a change in the price of baseball bats is weak.

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Definitions:

Factory Overhead

Indirect manufacturing costs not directly tied to individual products, encompassing expenses like factory rent, utilities, and equipment depreciation.

Work in Process Inventory

Items in a manufacturing process that are partially completed but not yet finished goods.

Raw Materials Used

The quantity of basic materials and components consumed in the production process to manufacture goods.

Finished Goods Inventory

Inventory of finished goods awaiting sale but not yet purchased by customers.