Assume That a 50 Per Cent Petrol Tax Led to a Large

question 9

Multiple Choice

Assume that a 50 per cent petrol tax led to a large increase in its price and only a small decrease in the quantity of petrol demanded.Economic analysis would lead one to conclude that________.

• A)petrol should be taxed because the benefits of the tax would exceed the costs.
• B)petrol should not be taxed because the benefits are uncertain.
• C)petrol should not be taxed on ethical grounds since ethical benefits and costs cannot be measured.
• D)the benefits of taxing petrol is a normative issue.Economic analysis can be used to contribute to discussion of this issue but cannot decide it.

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Definitions:

Material Cost

The total cost associated with the raw materials and components used in manufacturing a product.

Hourly Wage

A rate of pay based on the number of hours worked, distinct from salary pay which is fixed regardless of hours worked.

Excess Inventory

Inventory that exceeds the optimal level, often leading to additional storage costs and potential obsolescence.

Aggregate Plan

A strategic framework used in production and operations management to determine the necessary production levels, inventory, and workforce to meet anticipated demand.