Figure 8-19 the Vertical Distance Between Points a and B Represents the Represents

question 56

Multiple Choice

Figure 8-19
The vertical distance between points A and B represents the original tax.
-Refer to Figure 8-19.The original tax can be represented by the vertical distance AB.Suppose the government is deciding whether to lower the tax to CD or raise it to FG.Which of the following statements is correct?

• A)Compared to the original tax,the larger tax will decrease both tax revenue and deadweight loss.
• B)Compared to the original tax,the smaller tax will increase both tax revenue and deadweight loss.
• C)Compared to the original tax,the larger tax will decrease tax revenue and increase deadweight loss.
• D)Both a and b are correct.

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Definitions:

Price Competition

A market situation where sellers compete primarily on the price of their goods or services, often leading to lower prices for consumers.

Oligopolistic Industries

Markets or industries dominated by a few large firms, where each firm has some market power and their decisions affect each other.

Celler-Kefauver Act

A United States antitrust law passed in 1950 aimed at preventing anticompetitive mergers and acquisitions that might reduce competition.

Conglomerate Mergers

Mergers between firms that operate in unrelated business activities, aiming to diversify product offerings and risks.