If the Government Wanted a Tax to Reduce the Quantity

question 61

Multiple Choice

If the government wanted a tax to reduce the quantity exchanged a large amount but not raise much in tax revenue, it would want to tax an industry with

• A)​elastic supply and demand curves.
• B)​inelastic supply and demand curves.
• C)​inelastic supply and elastic demand.
• D)​elastic supply and inelastic demand.

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Definitions:

Competitive Price-Searcher

involves businesses that actively seek to determine prices through analysis of market conditions, competitors' prices, and customer preferences to maximize profits.

Demand Conditions

Refers to the nature and size of the market demand for goods and services in an industry.

Efficient Scale

The level of production that minimizes the average total costs of production, achieving economies of scale.

Competitive Price-Searcher

A market condition where firms actively seek to find the optimal price that balances profitability with consumer demand, typically in markets with differentiated products.