Suppose That the Market for Large,64-Ounce Soft Drinks in the Town

question 24

Multiple Choice

Suppose that the market for large,64-ounce soft drinks in the town of Pudgyville is characterized by a typical,downward-sloping,linear demand curve and a typical,upward-sloping,linear supply curve.The market is initially in equilibrium with 1,000 soft drinks sold per day.The newly-elected Mayor of Pudgyville wants to tax 64-ounce soft drinks.She is considering either a $0.10 tax or a $0.30 tax.Her chief economic advisor estimates that the number of soft drinks sold after a $0.10 tax will be 900 and after a $0.30 tax will be 500.Which tax is better?

• A)The $0.10 tax is better because it raises more revenue and creates a lower deadweight loss than the $0.30 tax.
• B)The $0.30 tax is better because it raises more revenue and creates a lower deadweight loss than the $0.10 tax.
• C)It is not clear which tax is better because although the $0.30 tax raises more tax revenues,it creates a larger deadweight loss than the $0.10 tax.
• D)It is not clear which tax is better because although the $0.10 tax raises more tax revenues,it creates a larger deadweight loss than the $0.30 tax.

---

Definitions:

Aggression

Behavior intended to harm or intimidate others.

Racial Minority

A demographic group characterized by a distinct racial identity that makes up a smaller percentage of the total population.

Violent Media

Media content that depicts physical aggression, harm, or violence towards individuals or groups.

Severe Mental Illness

Refers to mental disorders that significantly impair one's ability to engage in major life activities, requiring intensive treatment and support.