The Elasticity of Demand for Chocolate Chip Cookies Is 0

question 238

Multiple Choice

The elasticity of demand for chocolate chip cookies is 0.6 and the elasticity of supply for these cookies is 1.9. If a tax is imposed on purchases of chocolate chip cookies, then the

• A) consumers would pay more of the tax.
• B) producers would pay more of the tax.
• C) tax would be equally shared by the consumers and the producers.
• D) consumers would pay the entire tax because their demand is less elastic than the producers' supply.

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Definitions:

Circular Flow Diagram

An illustration showing the flow of resources from households to firms and of products from firms to households. These flows are accompanied by reverse flows of money from firms to households and from households to firms.

Resource Market

A market where resources (like labor, capital, and land) are bought and sold, allowing businesses to acquire what they need to produce goods and services.

Resource Market

A market where resources (or inputs) for production, such as labor, land, and capital, are bought and sold.

Financial Capital

Financial capital comprises the funds necessary for businesses to buy what they need to produce their products or to provide their services, including money, credit, and other financial instruments.