Assume the Supply Curve for Cigars Is a Typical,upward-Sloping Straight

question 11

Multiple Choice

Assume the supply curve for cigars is a typical,upward-sloping straight line,and the demand curve for cigars is a typical,downward-sloping straight line.Suppose the equilibrium quantity in the market for cigars is 1,000 per month when there is no tax.Then a tax of $0.50 per cigar is imposed.The effective price paid by buyers increases from $1.50 to $1.90 and the effective price received by sellers falls from $1.50 to $1.40.The government's tax revenue amounts to $475 per month.Which of the following statements is correct?

• A)The demand for cigars is less elastic than the supply of cigars.
• B)The tax causes a decrease in consumer surplus of $390 and a decrease in producer surplus of $97.50.
• C)The deadweight loss of the tax is $12.50.
• D)All of the above are correct.

---

Definitions:

Home-Country Nationals

Employees from the country where a multinational company is headquartered, as opposed to those from the countries where the company operates.

Parent-Country Culture

Entails the norms, practices, and business behaviors that are characteristic of the headquarters' country of a multinational corporation.

Relocation Costs

Expenses incurred when moving employees from one location to another for work purposes, which can include travel expenses, moving services, and temporary housing.

Union Density

The ratio of the number of union members to the number of potential members, indicating the strength of union representation.