Figure 8-15 -Refer to Figure 8-15. Panel (A) and Panel (B) Each

question 141

Multiple Choice

Figure 8-15

-Refer to Figure 8-15. Panel (a) and Panel (b) each illustrate a $4 tax placed on a market. In comparison to Panel (a) , Panel (b) illustrates which of the following statements?

• A) When demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic.
• B) When demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic.
• C) When supply is relatively inelastic, the deadweight loss of a tax is smaller than when supply is relatively elastic.
• D) When supply is relatively elastic, the deadweight loss of a tax is larger than when supply is relatively inelastid.

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Definitions:

Regulated Monopoly

A market structure where a single firm dominates the market but its operations are overseen and controlled by government regulations to prevent abuse of its market power.

Productive Efficiency

A situation in which an economy or production process cannot produce more of one good without sacrificing the production of another good and without improving the production technology.

Allocative Efficiency

A state of the economy in which production is in accordance with consumer preferences; every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it.

Price Discrimination

A pricing strategy where a company sells the same product or service at different prices to different customers, often based on their willingness to pay.