"For a Given Supply Curve, the Excess Burden of a Tax

question 172

Multiple Choice

"For a given supply curve, the excess burden of a tax will be greater when the demand for a product is less elastic than when the demand is more elastic." This statement is

• A)correct.
• B)incorrect because the incidence of the tax, not the burden of the tax, is affected by the elasticity of demand.
• C)incorrect. When demand is less elastic, the burden of the tax is smaller than when the demand is more elastic.
• D)incorrect. The statement confuses demand with quantity demanded.

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Definitions:

Salvage Value

The forecasted price an asset will fetch at the time of sale once its period of usefulness is over.

Depreciation Expense

The allocation of the cost of an asset over its useful life to account for declines in value over time.

Double-declining-balance

An accelerated depreciation method that doubles the normal depreciation rate.

Salvage Value

The estimated residual value of an asset at the end of its useful life, representing what it could potentially be sold for or scrapped.