If an Excise Tax Is Placed on a Product That

question 47

Multiple Choice

If an excise tax is placed on a product that has a perfectly inelastic demand, then:​

• A) ​the entire tax will be paid by the consumer.
• B) ​the entire tax will be paid by the producer.
• C) ​the consumer and producer will each pay a share of the tax.
• D) ​the incidence of the tax cannot be determined unless we know the coefficient of price elasticity of supply.
• E) ​the tax is progressive.

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Definitions:

Batching Economies

The cost advantages gained by producing or processing goods in large batches, as opposed to individually or in small quantities.

Procurement

The process of sourcing and acquiring goods, services, or works from an external source, often through tendering or competitive bidding.