Suppose There Is Currently a Tax of $50 Per Ticket

question 5

Multiple Choice

Suppose there is currently a tax of $50 per ticket on airline tickets.Sellers of airline tickets are required to pay the tax to the government.If the tax is reduced from $50 per ticket to $30 per ticket,then

• A) the demand curve will shift upward by $20,and the effective price received by sellers will increase by $20.
• B) the demand curve will shift upward by $20,and the effective price received by sellers will increase by less than $20.
• C) the supply curve will shift downward by $20,and the price paid by buyers will decrease by $20.
• D) the supply curve will shift downward by $20,and the price paid by buyers will decrease by less than $20.

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Definitions:

Complementary Effect

The impact that the improvement or performance of one product or service has on the demand for another that is used in conjunction with it.

Fast-Food Restaurants

Eateries that serve food quickly and efficiently to customers, often characterized by a limited menu of pre-prepared or rapidly cooked items.

Oligopolistic Competition

A market structure characterized by a small number of firms that dominate the market, leading to competitive yet interdependent pricing and marketing strategies.

Price Wars

A competitive situation where retailers or producers continuously lower prices to attract customers, often at the expense of profit margins.