The Government Imposes a Unit Excise Tax on Bubble Gum

question 104

Multiple Choice

The government imposes a unit excise tax on bubble gum. What happens as a result?

• A) The equilibrium quantity of bubble gum increases.
• B) At the original market price, there will be a bubble gum surplus so price decreases.
• C) At the original market price, there is a bubble gum shortage and so price rises.
• D) There will be no change in either the market price or equilibrium quantity as long as the excise tax rate is 5 percent or less.

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Definitions:

Completely Randomized Design

An experimental design where all subjects are assigned randomly to various treatments, ensuring that the experiment does not systematically favor any outcomes.

F-distribution

A probability distribution that arises in the analysis of variances across different groups, commonly used in ANOVA testing.

Test Statistic

A value calculated from sample data during a hypothesis test that is used to determine whether to reject the null hypothesis.

ANOVA Table

A statistical table used in analysis of variance that summarizes the data variability within groups and between groups.