When a Tax Is Imposed on a Good for Which

question 14

Multiple Choice

When a tax is imposed on a good for which the supply is relatively elastic and the demand is relatively inelastic,

• A)buyers of the good will bear most of the burden of the tax.
• B)sellers of the good will bear most of the burden of the tax.
• C)buyers and sellers will each bear 50 percent of the burden of the tax.
• D)both equilibrium price and quantity will increase.

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Definitions:

Subsidies

Financial support provided by the government to individuals or businesses to lower the cost of goods and services or to support industry.

Olive Growers

Individuals or entities involved in the cultivation of olive trees and the production of olives for consumption or the extraction of olive oil.

United States

A federal republic consisting of 50 states, a federal district, five major self-governing territories, and various possessions.

Absolute Advantage

The ability of an individual, company, or country to produce a good or provide a service more efficiently than competitors, using the same amount of resources.