In the Country of Bora Bora, Consumers Buy Large Quantities

question 76

Multiple Choice

In the country of Bora Bora, consumers buy large quantities of alcohol, tobacco, and coffee. Last year, the prices of these goods each increased by 10 percent. The quantities demanded for these goods fell by 10, 3, and 8 percent, respectively. If the government is thinking about imposing a unit tax on one of these goods, which good should they choose to tax to raise the most tax revenue, and why?

• A) Alcohol; because the price elasticity is highest.
• B) Tobacco; because the price elasticity is lowest.
• C) Coffee; because it will have the lowest tax elasticity.
• D) Tobacco; because it will have the highest tax elasticity.

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Definitions:

Face Validity

A question or measure that appears to capture the concept it is intended to capture. See also expert validity and panel validity.

Likert-Type Scales

A response scale used in surveys to gather information on a participant's level of agreement or preferences towards a statement.

Human Communication

The process by which individuals share information, ideas, or feelings through verbal or non-verbal means.

Reliability

Reliability in research refers to the consistency or repeatability of a measure or test; a reliable measure produces similar results under consistent conditions.