Suppose That Government Imposes a Specific Excise Tax on Product

question 286

Multiple Choice

Suppose that government imposes a specific excise tax on product X of $4 per unit and that the price elasticity of supply of X is unitary (coefficient = 1) . If the incidence of the tax is such that the consumers of X pay $2 of the tax and the producers pay $2, we can conclude that the

• A)supply of X is inelastic.
• B)demand for X is elastic.
• C)demand for X is inelastic.
• D)demand for X is unitary elastic.

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Definitions:

Nearest Whole Number

A round-off method where decimal values are rounded to the closest integer.

Net Operating Income

A financial metric that calculates a company's profit after subtracting operating expenses, excluding taxes and interest payments.

Traceable Fixed Expense

Fixed costs that can be directly associated with a specific product, department, or segment of a business, facilitating more accurate financial analysis.

Net Operating Income

The profit generated from a company's core business operations, excluding expenses and revenues not directly related to its main activities.