Suppose the Price Elasticity of Demand Is 3

question 81

Multiple Choice

Suppose the price elasticity of demand is 3.0 and the price elasticity of supply is 0.08. The incidence of an excise tax

• A) falls primarily on consumers.
• B) falls primarily on producers.
• C) is shared evenly by consumers and producers.
• D) falls entirely on producers.

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Definitions:

Soft Rationing

Refers to the internal limitations set by a company on the funds allocated for capital projects, despite having a strong financial position.

Hard Rationing

A situation in corporate finance where there is a strict limit on the amount of new equity a company can issue.

Operating Cash Flow

Operating cash flow refers to the cash generated by a company's normal business operations, indicating whether a company is able to generate sufficient positive cash flow to maintain and grow its operations.

Variable Costs

Expenses that change in proportion to the amount of goods produced or the extent of services rendered.