Suppose the Demand for Pizza Is Inelastic and the Supply

question 34

Multiple Choice

Suppose the demand for pizza is inelastic and the supply ofpizza is elastic, and the demand for cigarettes is inelastic andthe supply of cigarettes is elastic. If a tax were levied on thesellers of both of these commodities, we would expect that theburden of:

• A)the pizza tax would fall more heavily on sellers than on buyers, and the burden of the cigarette tax would fall more
• Heavily on buyers than on sellers.
• B)the pizza tax would fall more heavily on buyers than on sellers, and the burden of the cigarette tax would fall more
• Heavily on sellers than on buyers.
• C)both the pizza and the cigarette taxes would fall more heavily on buyers than on sellers.
• D)both the pizza and the cigarette taxes would fall more heavily on sellers than on buyers.

Understand the implications of interest rate changes on loans and investments.

Calculate maturity values of investments using given interest rates and time periods.

Determine the amount of interest credited to accounts over specific periods.

Apply knowledge of interest rates to solve problems related to borrowing and lending.

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Definitions:

Investing Activities

Financial activities related to buying or selling long-term assets and investments, a key component of a company’s cash flow statement.

Financing Activities

Transactions that result in changes in the size and composition of the equity capital or borrowing of the company.

Cash Flows

The total amount of money being transferred into and out of a business, especially affecting liquidity.

Indirect Method

A cash flow statement formulation approach that adjusts net income for changes in non-cash accounts to calculate operating cash flow.