Assuming the Basic Purpose Is to Raise Additional Revenue, Should

question 113

Essay

Assuming the basic purpose is to raise additional revenue, should government levy an excise tax on cigarettes whose demand is highly inelastic or on a product whose demand is highly elastic? Are there any other reasons to levy such a tax?

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Definitions:

Compete

The act of striving against others for the purpose of achieving goals such as winning a market share, receiving recognition, or obtaining a scarce resource.

Tariff

A tax imposed by a government on goods and services imported from other countries, intended to raise revenue or protect domestic industries.

Internationally Traded Goods

Products and services that are bought and sold across national borders, subject to international agreements and regulations.

Comparative Advantage

The capability of an entity to manufacture a product or provide a service at a reduced opportunity cost compared to its competitors.