Suppose That Government Imposes a Specific Excise Tax on Product

question 159

Multiple Choice

Suppose that government imposes a specific excise tax on product X of $2 per unit and that the price elasticity of demand for X is unitary (coefficient = 1) . If the incidence of the tax is such that the producers of X pay $1.75 of the tax and the consumers pay $.25, we can conclude that the

• A) supply of X is highly inelastic.
• B) supply of X is highly elastic.
• C) demand for X is highly inelastic.
• D) demand for X is highly elastic.

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Definitions:

Chartreuse de Champmol

A large Carthusian monastery in Dijon, France, founded in the late 14th century, known for its artistic commissions and elaborate sculptures by renowned artists of the time.

Les Très Riches Heures

A highly ornate Gothic illuminated manuscript known as one of the most important examples of International Gothic art, created by the Limbourg brothers in the early 15th century.

Manuscripts

Handwritten documents or texts, especially those of historical, literary, or religious significance, before the invention of printing.

Panel Paintings

Artistic works created on a flat panel made of wood, canvas, or other durable material, often used for depicting religious scenes or portraits from the Middle Ages onwards.