Suppose an Excise Tax Is Imposed on Two Products X

question 61

Multiple Choice

Suppose an excise tax is imposed on two products X and Y, both of which have identical supply elasticities. The demand for good X is highly elastic, while the demand for good Y is highly inelastic. The deadweight loss (or excess burden) will be

• A) equal in both cases.
• B) larger for good X than good Y.
• C) larger for good Y than good X.
• D) zero in both cases.

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Definitions:

Sternocleidomastoid

A prominent neck muscle that extends diagonally across the side of the neck, involved in the rotation and flexion of the head.

Forced Inspiration

The process of taking air into the lungs with the use of accessory respiratory muscles, in addition to the primary muscles, usually under conditions of high demand or respiratory distress.

Pectoralis Minor

A thin, triangular muscle located beneath the pectoralis major, involved in movements of the shoulder and chest.

Pulmonary Ventilation

Pulmonary ventilation is the process of moving air in and out of the lungs to facilitate gas exchange with the internal environment, primarily involving oxygen and carbon dioxide.