Figure 8-16

question 244

Multiple Choice

Figure 8-16
-Refer to Figure 8-16. Panel a) and Panel b) each illustrate a $2 tax placed on a market. In comparison to Panel b) , Panel a) illustrates which of the following statements?

• A) When demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic.
• B) When demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic.
• C) When supply is relatively inelastic, the deadweight loss of a tax is smaller than when supply is relatively elastic.
• D) When supply is relatively elastic, the deadweight loss of a tax is larger than when supply is relatively inelastic.

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Definitions:

Exogenous

Factors or variables that are external to the economic model and not determined within the model itself.

Frictional Unemployment

Frictional unemployment is short-term and voluntary unemployment that occurs when people are between jobs or entering the workforce for the first time, often due to personal choices or circumstances.

Economic Activity

Actions that involve the production, distribution, and consumption of goods and services within an economy.

Skill Mismatch

A discrepancy between the skills offered by workers and the skills demanded by employers, which can lead to structural unemployment and inefficiency in the labor market.