Suppose That the Demand for Picture Frames Is Highly Inelastic

question 54

Multiple Choice

Suppose that the demand for picture frames is highly inelastic, and the supply of picture frames is highly elastic. A tax of $1 per frame levied on picture frames will increase the price paid by buyers of picture frames by

• A)less than $0.50.
• B)$0.50.
• C)between $0.50 and $1.
• D)$1.

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Definitions:

Stock Splits

A corporate action where a company divides its existing stock into multiple shares to boost the liquidity of the shares.

Par Value Method

A method in accounting for the transaction of shares, where shares are recorded in accounts at their face or nominal value, often used in transactions related to bonds or share capital.

Treasury Stock

Shares of a company's own stock that it has reacquired from shareholders and holds, reducing the amount of outstanding stock on the open market.

Contributed Capital

The total value of all monetary and non-monetary assets that shareholders have provided to a company in exchange for shares of stock.