Suppose That Policymakers Are Considering Placing a Tax on Either

question 7

Multiple Choice

Suppose that policymakers are considering placing a tax on either of two markets.In Market A,the tax will have a significant effect on the price consumers pay,but it will not affect equilibrium quantity very much.In Market B,the same tax will have only a small effect on the price consumers pay,but it will have a large effect on the equilibrium quantity.Other factors are held constant.In which market will the tax have a larger deadweight loss?

• A)Market A
• B)Market B
• C)The deadweight loss will be the same in both markets.
• D)There is not enough information to answer the question.

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Definitions:

Business Ownership

This pertains to the legal possession and responsibility of a business entity.

Large Company

A corporation or enterprise that operates on a large scale in terms of revenue, employees, or market presence.

Franchisors

Companies or individuals that grant the license to a third party for the conducting of a business under their brand and name.

Return on Investment

A performance measure used to evaluate the efficiency or profitability of an investment, calculated as the net profit of the investment divided by the cost of the investment.