Product Differentiation Allows a Firm to Charge a Higher Price

question 3

Multiple Choice

Product differentiation allows a firm to charge a higher price because the residual demand curve facing the firm

• A) is more elastic than the residual demand curve without product differentiation.
• B) is less elastic than the residual demand curve without product differentiation.
• C) is horizontal.
• D) shifts to the left.

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Definitions:

Direct Tax

Taxes paid directly to the government by the taxpayer, such as income tax.

Indirect Tax

A tax collected by an intermediary (like a retailer) from the person who bears the ultimate economic burden of the tax (like the consumer). Examples include sales tax and VAT (Value Added Tax).

Fiscal Year

A 12-month period used for accounting purposes and preparing financial statements that may or may not align with the calendar year.

Marginal Tax Rate

The tax rate applied to the last dollar of income earned.