Suppose a Tax Is Imposed on Bananas

question 8

Multiple Choice

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

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

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Definitions:

Psychogenic

Originating in the mind or in mental or emotional processes; having a psychological rather than a physiological cause.

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Physical trauma to the head, which can lead to various levels of brain injury, ranging from mild concussions to severe brain damage.

Emotional Shock

A psychological condition arising in response to a terrifying or traumatic event, causing a strong emotional impact.

Decay Theory

A theory suggesting that memory fades due to the mere passage of time unless it is actively rehearsed.