Suppose That Policymakers Are Considering Placing a Tax on Either

question 7

Multiple Choice

Suppose that policymakers are considering placing a tax on either of two markets.In Market A,the tax will have a significant effect on the price consumers pay,but it will not affect equilibrium quantity very much.In Market B,the same tax will have only a small effect on the price consumers pay,but it will have a large effect on the equilibrium quantity.Other factors are held constant.In which market will the tax have a larger deadweight loss?

• A)Market A
• B)Market B
• C)The deadweight loss will be the same in both markets.
• D)There is not enough information to answer the question.

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Definitions:

Location

A particular place or position.

Amplitude

In physics, the maximum extent of a vibration or oscillation, measured from the position of equilibrium.

Pitch

In music, the quality of a sound governed by the rate of vibrations producing it; the degree of highness or lowness of a tone.

Absolute Threshold

The minimum amount of stimulation needed for a stimulus to be detected by the senses.