If the Supply of a Product Is Perfectly Elastic and Demand

question 50

Multiple Choice

If the supply of a product is perfectly elastic and demand is downsloping, an excise tax of $2 per unit will increase price by

• A) more than $2.
• B) less than $2.
• C) $2 and increase equilibrium output.
• D) $2 and reduce equilibrium output.

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Definitions:

Total Debt

The sum of all liabilities, both short and long term, that a company owes.

Cash In Hand

The amount of liquid money or physical currency that a company or individual has readily available.

Bills Receivable

Financial documents representing money owed to a business by its customers that is payable within a short period.

Inventories

Quantities of goods and materials that a business holds for the purpose of sale or production.