The Demand for Insulin Is Quite Inelastic

question 49

Multiple Choice

The demand for insulin is quite inelastic.The demand for Pepsi is quite elastic.Suppose the elasticity of supply for insulin is the same as the elasticity of supply for Pepsi.If a $0.20 tax was imposed on each of these goods (holding everything else constant) ,which consumers would pay more of the tax?

• A) the Pepsi consumers
• B) the insulin consumers
• C) There would be no difference in the amount of tax paid by the consumers.
• D) More information is needed to determine which consumers pay more of the tax.
• E) The premise of the question is wrong because the elasticity of demand and the incidence of a tax are not related.

Understand the concept and implications of natural monopoly.

Recognize the impact of market structure changes from competitive to oligopolistic or monopolistic conditions.

Assess the effects of barriers to market entry on competition and market outcomes.

Analyze the factors that impact the likelihood of successful collusion and the consequences of cartels.

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