A Tax Is Levied on Products a and B, Both

question 283

Multiple Choice

A tax is levied on products A and B, both of which have the same price elasticity of supply. The demand for A is more inelastic than is the demand for B. Other things constant, how will this affect the incidence of an excise tax on these products?

• A) Producers will bear a smaller share (and consumers a larger share) of the tax burden on A than B.
• B) Consumers will bear a smaller share (and producers a larger share) of the tax burden on A than B.
• C) The deadweight loss (or excess burden) will be larger for good A than B.
• D) All of the above are true.

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Definitions:

Hydrogen Bonds

A weak bond between two molecules resulting from an electrostatic attraction between a proton in one molecule and an electronegative atom in the other, playing a crucial role in the structure of water and biological molecules.

Boils

Painful, pus-filled bumps on the skin resulting from the infection of hair follicles, primarily by Staphylococcus aureus bacteria.

Steam

The gas phase of water, produced when water boils, transferring heat energy and being used in various industrial and cooking processes.

Crystalline

Consisting of or containing crystals, or being structured in a way that forms a repeating pattern at the atomic or molecular level.