Which of the Following Statements Is Correct Regarding a Tax

question 53

Multiple Choice

Which of the following statements is correct regarding a tax on a good and the resulting deadweight loss?

• A)The greater are the price elasticities of supply and demand,the greater is the deadweight loss.
• B)The greater is the price elasticity of supply and the smaller is the price elasticity of demand,the greater is the deadweight loss.
• C)The smaller are the decreases in quantity demanded and quantity supplied,the greater the deadweight loss.
• D)The smaller is the wedge between the effective price to sellers and the effective price to buyers,the greater is the deadweight loss.

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Definitions:

Annual Inflation Rate

The percentage increase in the price of goods and services over a one-year period, reflecting the purchasing power of a currency.

Automobiles

Motor vehicles with four wheels designed primarily for passenger transportation on roads.

Simple Interest

Interest computed solely on the initial amount of a loan or deposit, not taking into account the effects of compounding.

Annual Raises

Incremental increases in salary or wages that employees receive on a yearly basis as a reward for performance and/or to keep up with inflation.