Producers Will Lose No Producer Surplus Due to a Tax

question 30

Multiple Choice

Producers will lose no producer surplus due to a tax if supply in their market is perfectly elastic because

• A) consumers can effortlessly change their behavior in response to the tax.
• B) firms will decide not to pay the tax to the government.
• C) the government will decide to tax something else.
• D) the amount of the tax is relatively low.
• E) producers can effortlessly change their behavior in response to the tax.

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Definitions:

Sales Revenue

The total amount of money generated by a company from its sales of goods or services, before any expenses are subtracted.

Decentralized Segments

Parts of an organization that operate independently with their decision-making processes, instead of being centrally managed.

Residual Income

The excess of operating income over a minimum acceptable operating income.

Operating Cash Flows

Operating cash flows refer to the cash generated from the normal operations of a business, including cash receipts and payments for goods, services, and other routine company activities.