The Government Reduces the Excise Tax on the Sellers in a Competitive

question 42

Multiple Choice

The government reduces the excise tax on the sellers in a competitive industry by $10 per unit sold.Both supply and demand curves have some elasticity with respect to price.This reduction in tax means that:

• A)supply curve shifts down by $10, but (unless demand is perfectly elastic)price remain constant.
• B)supply curve shifts down by less than $10, but (unless demand is highly inelastic)price falls by more than $10.
• C)supply curve shifts down by less than $10, but (unless demand is highly elastic)price falls by $10.
• D)supply curve shifts down by $10, but (unless supply is perfectly elastic)any price decline is less than $10.
• E)demand curve shift down by $10 and price falls by $10.

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