What Effect Will a Tax on Sellers of Cellphones Have

question 214

Multiple Choice

What effect will a tax on sellers of cellphones have on the cell phone market

• A)It will reduce the size of the cellphone market.
• B)It will increase the size of the cellphone market.
• C)It will increase the price of cellphones, but not the size of the market.
• D)It will decrease the price of cellphones, but not the size of the market.

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Definitions:

Loss Aversion

A cognitive bias reflecting the tendency for people to prefer avoiding losses to acquiring equivalent gains, suggesting that losses are perceived as more severe than gains.

Status Quo Bias

A cognitive bias that represents a preference for the current state of affairs, leading individuals to resist change.

Marginal Cost

The expense associated with creating an extra unit of a product or service.

Marginal Benefit

The further satisfaction or value an individual gains from consuming an extra unit of a certain product or service.