How Does the Imposition of an Excise Tax on a Good

question 170

Multiple Choice

How does the imposition of an excise tax on a good affect its market equilibrium?

• A) Equilibrium quantity decreases, and equilibrium price decreases.
• B) Equilibrium quantity decreases, and equilibrium price increases.
• C) Equilibrium quantity increases, and equilibrium price decreases.
• D) Equilibrium quantity increases, and equilibrium price increases.

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Definitions:

Correlated

A measure of the relationship between two variables, indicating how the change in one can predict the change in the other.

Multicollinearity

A statistical phenomenon in which two or more predictor variables in a multiple regression model are highly correlated, leading to difficulties in distinguishing their individual effects on the dependent variable.

Independent Variables

Variables in an experiment or model that are manipulated or categorized to observe their effect on dependent variables.

Highly Correlated

Refers to a strong statistical relationship between two or more variables where changes in one variable are closely associated with changes in another.