Consider an Excise Tax Imposed on Daily Parking Charges in the Downtown

question 79

Multiple Choice

Consider an excise tax imposed on daily parking charges in the downtown of a small city.Before the imposition of the tax,equilibrium price and quantity are $15 and 100 cars parked.(P = $15,Q = 100) .The city government imposes a tax of $3 per car parked per day.Market equilibrium adjusts to P = $18 and Q = 100.Which of the following statements about the burden of the tax is correct?

• A)Price elasticity of supply is 0 and therefore the entire burden of the tax falls on the consumer.
• B)Elasticity of demand is 0 and therefore the entire burden of the tax falls on the consumer.
• C)Elasticity of supply is 1 and therefore the entire burden of the tax falls on the seller.
• D)Price elasticity of demand is 1 and therefore the entire burden of the tax falls on the seller
• E)The burden of the tax is shared equally by the seller and the consumer.

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Definitions:

Binomial Random Variable

A type of discrete random variable that arises in situations where an experiment or process is repeated a fixed number of times, with each trial having two possible outcomes (success or failure) and a constant probability of success.

Binomial Probability Distribution

A probability distribution that summarizes the likelihood that a variable will take one of two independent values under a given set of parameters or conditions.

Binomial Problem

A statistical question or experiment that has exactly two possible outcomes, 'success' or 'failure', and where the probability of success is the same each time the experiment is conducted.

Standard Deviation

Standard deviation is a measure of the amount of variation or dispersion in a set of values, indicating how much the values in a dataset deviate from the mean.