If the Price Effect Outweighs the Quantity Effect,then a Tax

question 35

Multiple Choice

If the price effect outweighs the quantity effect,then a tax:

• A) increase will raise revenue.
• B) decrease will raise revenue.
• C) increase will lower revenue.
• D) increase will not change revenue.

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Definitions:

Smart People

Individuals who exhibit high levels of intelligence, creativity, and capacity for complex problem-solving.

Framing

The act of constructing or presenting a concept, issue, or situation in a specific way to influence perception.

Cognitive Biases

Systematic patterns of deviation from norm or rationality in judgment, whereby inferences about other people and situations may be drawn in an illogical fashion.

Bounded Rationality

A concept that decision-makers are limited by the information they have, cognitive limitations, and finite time to make decisions.