If Lower-Income Households Spend a Greater Share of Their Income

question 108

Multiple Choice

If lower-income households spend a greater share of their income on cigarettes than do higher-income households,then a tax that raises the price of cigarettes will

• A) cause lower-income households to incur a greater loss of consumer surplus than that incurred by higher-income households.
• B) cause higher-income households to incur a greater loss of consumer surplus than that incurred by lower-income households.
• C) raise consumer surplus among higher-income households.
• D) cause consumer surplus to decline among smokers, but the relative impact cannot be determined from the given information.

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