Consider a 10% Excise Tax That Is Similarly Applied to Good

question 28

Multiple Choice

Consider a 10% excise tax that is similarly applied to good X,which has a price elasticity of 2.7,and to good Y,that has a price elasticity of 0.6.We can predict that the excess burden of this tax in the market for good X will be ________ the excess burden in the market for good Y.

• A)no larger than
• B)equal to
• C)smaller than
• D)larger than
• E)2.1 times the size of

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Definitions:

Level Of Significance

A threshold used in statistical hypothesis testing to determine if the null hypothesis can be rejected, commonly denoted as alpha.

Loaded Die

A die that has been tampered with to land on specific numbers more frequently than a fair die.

Null Hypothesis

A hypothesis in statistical analysis that suggests no significant difference or effect.

Uniformly Distributed

Describes a type of probability distribution in which all outcomes are equally likely over a certain interval.