If an Increase in the Excise Tax Imposed on Cigarettes

question 133

Multiple Choice

If an increase in the excise tax imposed on cigarettes pushes the price per pack up by 20 percent, and the quantity sold declines by 8 percent as a result, the price elasticity of demand for cigarettes is equal to

• A) −0.2.
• B) −0.4.
• C) −0.8.
• D) −5.

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Definitions:

Comparative Advantage

The ability of a country or firm to produce a particular good or service at a lower opportunity cost than others, leading to more efficient trade possibilities.

Absolute Advantage

Absolute advantage refers to the ability of an individual, firm, or country to produce more of a good or service than competitors using the same amount of resources.

Dishwashing

The process of cleaning cooking utensils, dishes, and other kitchenware, typically done manually by hand or using a dishwasher.

Absolute Advantage

The capacity of a nation, person, corporation, or area to generate a product or service at a cheaper per-unit expense than any other party.