The Demand Curve for Good X Is Generally Highly Inelastic

question 185

Multiple Choice

The demand curve for good X is generally highly inelastic at and around the current price. If we assume that the supply curve is neither perfectly elastic nor perfectly inelastic, then who will pay the greater share of a tax placed on the production of good X?

• A)The buyers will pay the greater share.
• B)The sellers will pay the greater share.
• C)The buyers and the sellers will pay equal shares.
• D)There is not enough information to answer the question.

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Definitions:

Mutually Exclusive Projects

Investment opportunities where the acceptance of one project requires the rejection of another.

Cost of Capital

The desired return a corporation aims for in its investment activities to retain its market capitalization and lure in investments.

IRR

Internal Rate of Return; a financial metric used to evaluate the profitability of investments, indicating the annualized effective compounded return rate.

NPV

Net Present Value, a calculation to determine the value of a projected investment by subtracting the present value of cash outflows from the present value of cash inflows.