What Determines the Proportion of a Unit Excise Tax That

question 115

Multiple Choice

What determines the proportion of a unit excise tax that will be passed on to consumers in the form of higher prices?

• A) the nature of the projects funded by the tax
• B) the number of additional taxes that consumers have to pay
• C) the popularity of the tax
• D) the degree to which quantity demanded and supplied of the good respond to price changes

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Definitions:

Marginal Revenue Product

The additional revenue generated by employing one more unit of a factor of production, holding all other factors constant.

Rent

The price paid for the use of property or land by one party to another under the terms of a lease agreement.

Marginal Physical Product

The additional output that is produced by adding one more unit of a specific input, holding all other inputs constant.

Total Revenue

The total amount of money received by a company from its sales of goods or services.