Good a Has a Price Elasticity of Demand of 0

question 62

Multiple Choice

Good A has a price elasticity of demand of 0.27,while good B has a price elasticity of demand of 2.9.To raise the most tax revenue,the government should:

• A) place a unit tax on good A.
• B) place a unit tax on good B.
• C) raise the price elasticity of demand for good A.
• D) subsidise the production of good B.
• E) cut its spending for various social programs.

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Definitions:

Personnel Costs

Personnel costs refer to the expenses associated with employing staff, including wages, benefits, training, and other related costs.

Weighted-Average Method

An inventory valuation method that calculates the cost of goods sold and ending inventory based on the average cost of all units available for sale.

Process Costing

An accounting method used to allocate costs to units of product in processes where the products are indistinguishable from each other, such as in chemical processing or food production.

Conversion Costs

The total of direct labor costs plus manufacturing overhead costs, indicating the expenditures involved in transforming raw materials into completed products.