Suppose There Is an Increase in the Excise Tax Imposed

question 260

Multiple Choice

Suppose there is an increase in the excise tax imposed on cigarettes, a good for which the demand is relatively inelastic. The short-run burden of the tax increase will be borne primarily by

• A) consumers, because the increase in market price will be large relative to the increase in the excise tax.
• B) firms, because the increase in market price will be large relative to the increase in the excise tax.
• C) consumers, because the increase in market price will be small relative to the increase in the excise tax.
• D) firms, because the increase in market price will be small relative to the increase in the excise tax.

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Definitions:

Fetus

A developing stage of a mammal after the embryonic stage and before birth, during which significant growth and development occur.

Couvade

Symptoms of pregnancy and birth experienced by fathers.

Cesarean Sections

A surgical procedure used to deliver a baby through incisions in the abdomen and uterus.

Epidurals

A type of anesthesia used especially in childbirth to produce loss of sensation below the waist.