If a Tax Is Imposed on a Market with Inelastic

question 148

Multiple Choice

If a tax is imposed on a market with inelastic supply and elastic demand,then

• A)buyers will bear most of the burden of the tax.
• B)sellers will bear most of the burden of the tax.
• C)the burden of the tax will be shared equally between buyers and sellers.
• D)it is impossible to determine how the burden of the tax will be shared.

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Definitions:

Supracompetitive Pricing

Setting the price of a product or service higher than the competitive market price, often as a result of monopoly power or market inefficiencies.

Sovereign Compulsion Doctrine

A legal principle that excuses a person or entity from liability if an action was performed under the direct order or compulsion of a government or sovereign.

Act of State Doctrine

A principle in international law that prohibits a country's courts from examining the validity of public acts committed by another country within its own territory.

Conglomerate Merger

A type of merger where two or more companies operating in different industries join forces or assets.