In a Perfectly Competitive Market, Which of the Following Will

question 52

Multiple Choice

In a perfectly competitive market, which of the following will not occur as a result of an excise tax?

• A)The market will under-produce relative to the efficient level.
• B)Consumer surplus will be higher than with no tax since the tax is imposed on suppliers.
• C)Producer surplus will be lower than with no tax.
• D)The tax causes a deadweight loss.

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Definitions:

Capital Intensity Ratio

A metric used to determine the amount of assets required to generate a dollar of revenue; higher ratios indicate more assets are needed.

Accounts Payable

Financial obligations or debts owed by a company to its creditors or suppliers for goods and services received.

Net Income

Refers to the total profit of a company after all expenses and taxes have been subtracted from revenue.

Sales Decrease

A reduction in the amount of products or services sold by a business over a given period.