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:

Electron

A subatomic particle with a negative charge, found in the electron clouds surrounding the nucleus of an atom.

Line Spectra

Line spectra are the emission or absorption of light at specific wavelengths by atoms or molecules transitioning between energy levels, resulting in distinct lines characteristic of the substance.

Quantized Energy Levels

The concept in quantum mechanics that energy levels in atoms and molecules are discrete, not continuous.

Spectral Emissions

The set of wavelengths or frequencies emitted by a substance or object, often used to identify its composition.