Consider Two Increasing-Cost Competitive Industries (A and B)having Identical Supply

question 17

Multiple Choice

Consider two increasing-cost competitive industries (A and B) having identical supply curves.However,the demand curve faced by industry A is more inelastic than the demand curve of industry B.Which of the following is true if a per-unit excise tax is levied on the output of both the industries?

• A)The consumers of industry A's product will bear a greater burden of the tax than the producers.
• B)The consumers of industry A's product will bear a smaller burden of the tax than the producers.
• C)The consumers of industry B's product will bear a larger burden of the tax than the consumers of industry A.
• D)The consumers of industry B's product will bear the entire burden of the tax imposed on that product.

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Definitions:

Process Technology

The combination of tools, equipment, methodologies, and techniques used to produce goods or services.

Continuous-production

A method of production where materials are continuously processed or produced 24/7, typical in industries like chemicals and power plants, aiming for a high level of productivity.

Downsizing

A strategy involving reducing the size of a company's workforce to improve its efficiency and reduce costs.

Planned Strategy

A predetermined approach designed to achieve long-term or overall aims and objectives.