If the Supply of a Product Is Perfectly Elastic and Demand

question 50

Multiple Choice

If the supply of a product is perfectly elastic and demand is downsloping, an excise tax of $2 per unit will increase price by

• A) more than $2.
• B) less than $2.
• C) $2 and increase equilibrium output.
• D) $2 and reduce equilibrium output.

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Definitions:

Cirrhosis

A chronic liver disease marked by degeneration of cells, inflammation, and fibrous thickening of tissue.

Excessive Drinking

The consumption of alcohol in amounts that are harmful to one's health or lead to behavior that is damaging to oneself or others.

Alcoholism

A chronic condition characterized by uncontrolled drinking and a preoccupation with alcohol, despite adverse effects.

Drinking Alcohol

The consumption of beverages containing ethanol, which can have various social, cultural, and physiological effects.