Suppose That the Demand for Picture Frames Is Highly Inelastic

question 54

Multiple Choice

Suppose that the demand for picture frames is highly inelastic, and the supply of picture frames is highly elastic. A tax of $1 per frame levied on picture frames will increase the price paid by buyers of picture frames by

• A)less than $0.50.
• B)$0.50.
• C)between $0.50 and $1.
• D)$1.

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Definitions:

Capital Quality

The degree of excellence of physical and intellectual assets used in the production of goods or services, affecting overall productivity and efficiency.

Simon Kuznets

An economist known for his work on economic growth and for formulating the concept of Gross Domestic Product (GDP) as a measure of national income.

Economic Growth

An increase in the production of goods and services in an economy, typically measured by GDP.

Quality of Resources

The effectiveness, efficiency, and skills of economic resources, including labor, capital, and natural resources.