Assume the Demand for Cigarettes Is Relatively Inelastic,and the Supply

question 159

Multiple Choice

Assume the demand for cigarettes is relatively inelastic,and the supply of cigarettes is relatively elastic.When cigarettes are taxed,we would expect

• A)most of the burden of the tax to fall on sellers of cigarettes,regardless of whether buyers or sellers of cigarettes are required to pay the tax to the government.
• B)most of the burden of the tax to fall on buyers of cigarettes,regardless of whether buyers or sellers of cigarettes are required to pay the tax to the government.
• C)the distribution of the tax burden between buyers and sellers of cigarettes to depend on whether buyers or sellers of cigarettes are required to pay the tax to the government.
• D)a large percentage of smokers to quit smoking in response to the tax.

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Definitions:

Perpetuity

A type of financial instrument that pays a fixed amount of cash flows indefinitely, without a maturity date.

Compounded Monthly

A method of calculating interest in which the interest earned each month is added to the principal, and future interest is calculated on the new total.

Interest Rate

The percentage at which interest is paid by a borrower for the use of money, or the rate earned on an investment.

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Benefits or returns that are received on a yearly basis from investments, insurance policies, or employee benefit programs.