Assume That the Elasticities of Supply and Demand in an Industry

question 112

Multiple Choice

Assume that the elasticities of supply and demand in an industry are both equal to 2 and that it is currently untaxed. A new tax imposed on the industry will:

• A)​be borne more by suppliers than demanders.
• B)​be borne more by demanders than suppliers.
• C)​be borne equally by demanders and suppliers.
• D)​not raise any added revenue for the government since demand is relatively elastic.

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Definitions:

Asset Increase

A rise in the total value of a company's assets, which can result from additional investments, improved asset values, or acquisition of new assets.

Creditor

An individual or institution to which money is owed.

Expense

A financial outlay that is incurred through business operations or activities.

Equipment

Tangible, long-term assets used in the operations of a business, not intended for sale.