If the Demand for a Product Is Perfectly Inelastic and the Supply

question 114

Multiple Choice

If the demand for a product is perfectly inelastic and the supply curve is upsloping,a $1 excise tax per unit of output will:

• A) raise price by less than $1.
• B) raise price by more than $1.
• C) raise price by $1.
• D) lower price by $1.

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Definitions:

Value of a Right

The theoretical value of a subscription right, which allows existing shareholders to purchase additional shares at a discount before the new shares are offered to the public.

Initial Public Offering (IPO)

The first sale of a company's stock to the public, transitioning the company from private to public to raise equity capital.

Rights Offering

A financial mechanism allowing current shareholders to purchase additional shares directly from the company at a specified price before the shares are offered to the public.

Underwriting Provision

A clause or condition included in financial agreements, often in insurance or security underwriting, detailing specific obligations or requirements.