If the Elasticity of Supply Is Much Greater Than the Elasticity

question 51

Multiple Choice

If the elasticity of supply is much greater than the elasticity of demand,an excise tax levied on the suppliers will

• A)cause the suppliers to incur a greater burden of the tax than demanders
• B)cause the demanders to incur a greater burden of the tax than suppliers
• C)the burden of the tax will be shared equally between the suppliers and the demanders
• D)cause the entire burden of the tax to rest on the demanders
• E)Without more information as to the amount of the excise tax,who will incur a greater burden will be unclear

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Definitions:

Markup

The uplift in the purchase price of items specifically to recover operational overhead and to make a profit.

Split-off Point

The stage in a production process where multiple products are derived from a single process or material, leading to separate further processing.

Joint Production Costs

Costs incurred in the process of producing two or more products simultaneously from the same raw materials or process.

Split-off Point

Refers to the stage in a production process where joint products can be recognized as separate products.