In the Absence of Taxes, Jane Would Prefer to Purchase

question 29

Multiple Choice

In the absence of taxes, Jane would prefer to purchase a large four-wheel drive (4WD) .However, the government has recently decided to place a $10 000 nuisance tax on 4WDs.Which of the following statements best reflects the effect of this tax if Jane decides to purchase a small economy car as a result of the tax?

• A)other people who choose to purchase 4WDs will incur the cost of the deadweight loss of the tax
• B)there are no deadweight losses as long as some people still choose to purchase 4WDs
• C)all deadweight losses are mitigated if there is a net decrease in air pollution
• D)Jane is worse off, and her loss of welfare is part of the deadweight loss of the tax

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Definitions:

Transpiration

Evaporation of water from aboveground plant parts.

Polar Latitudes

Regions near the poles of the Earth, characterized by extreme cold and seasonal variations in daylight.

Equatorial Latitudes

The region near the equator, characterized by a hot climate year-round due to receiving the most direct sunlight.

Temperate Latitudes

Regions of the Earth lying between the tropics and the polar circles, characterized by moderate temperatures and distinct seasonal changes.