In Order to Discourage Consumers from Eating Unhealthy Fast Food

question 39

Multiple Choice

In order to discourage consumers from eating unhealthy fast food, the government is considering placing a tax on all fast food sales. Which of the following statements is true?

• A) Given the numerous alternatives, consumers' demand for fast food is relatively elastic and the tax will likely work to discourage fast food consumption.
• B) The tax on fast food will likely raise considerable revenue but will be unlikely to reduce the consumption of fast food by consumers.
• C) The tax on fast food will likely increase the demand for home cooked meals.
• D) Both A and C are true.

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Definitions:

Long-Run Supply Function

A relationship indicating the quantity of a good or service that producers are willing to make available in the market over a long period, considering all inputs are variable.

Long-Run Total Cost

The sum of all costs incurred by a firm in the production of goods or services when all inputs are considered variable in the long term.

Profit Maximization

The process of determining the best output and pricing levels to achieve the most profit.

Production Function

An equation in mathematics that outlines how inputs correlate with the greatest output achievable from those inputs.