Suppose Supply Is Perfectly Inelastic, While Demand Is Relatively Elastic

question 125

Multiple Choice

Suppose supply is perfectly inelastic, while demand is relatively elastic.A tax of $1.00 is levied on the purchasers of the good.Which of the following statements is correct?

• A)the government will fail to raise any tax revenue
• B)there will be a positive deadweight loss
• C)there will be no deadweight loss
• D)government revenue will be less than the deadweight loss of the tax.

Calculate the social cost of producing goods in the presence of external costs.

Evaluate the effects of externalities on the efficiency of the market outcomes.

Identify and justify the use of taxes or subsidies to achieve social optimum.

Analyze the impact of externalities on private and social costs and benefits.

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Definitions:

New Experience

Encountering or undergoing something for the first time, which can lead to learning, adaptation, and growth.

Secondary Circular Reactions

Part of Jean Piaget's theory of cognitive development, representing repetitive behaviors in infants aimed at reproducing interesting effects in their environment.

Mental Representations

Internal images, concepts, or thoughts that stand in for objects, events, or relations in the outside world, aiding in understanding and interaction.

Goal-directed Behavior

Actions taken with the intention of achieving a specific outcome or objective, showing purpose and direction in behavior.