Consumers Will Bear a Larger Burden of an Excise Tax

question 137

Multiple Choice

Consumers will bear a larger burden of an excise tax if

• A)demand is relatively elastic and supply is relatively inelastic.
• B)demand is relatively inelastic and supply is relatively elastic.
• C)both demand and supply are relatively inelastic.
• D)both demand and supply are relatively elastic.
• E)the tax is collected by firms rather than remitted directly to the government by consumers.

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Definitions:

Average Cost

The cost per unit of output, calculated by dividing the total cost of production by the number of units produced.

Marginal Cost

The additional cost incurred in producing one more unit of a good or service.

Variable Cost

Costs that change in proportion to the level of production or sales activity of a business.

Total Cost

The overall expense incurred in the production of goods or services, including both fixed and variable costs.