Suppose a Tax Is Imposed on Bananas

question 8

Multiple Choice

Suppose a tax is imposed on bananas. In which of the following cases will the tax cause the equilibrium quantity of bananas to shrink by the largest amount?

• A)The response of buyers to a change in the price of bananas is strong, and the response of sellers to a change in the price of bananas is weak.
• B)The response of sellers to a change in the price of bananas is strong, and the response of buyers to a change in the price of bananas is weak.
• C)The response of buyers and sellers to a change in the price of bananas is strong.
• D)The response of buyers and sellers to a change in the price of bananas is weak.

---

Definitions:

Inputs

The resources such as labor, materials, and capital, that are used in the production process to produce goods and services.

Output

The total amount of goods or services produced by an individual, firm, industry, or economy in a given period.

Production Function

A formula detailing how input factors like raw materials and labor are turned into output or goods.

Inputs

Inputs like workforce, raw materials, and funds that are employed in the manufacturing process to produce products or services.