During the COVID-19 pandemic, alcohol consumption increased dramatically. In response, the government is considering increasing the tax rate on alcohol. It's known that the demand for alcohol is inelastic, and the supply of alcohol is perfectly elastic. Which of the following statements are true? (Select all that apply.) Question 5Answer a. A tax on alcohol is one way to make consumer internalize the cost of the externalities associated with drinking, such as long-term health implications. b. Regardless of how the tax is implemented, consumers will pay the full amount of the tax. c. It doesn't matter how the tax is implemented. d. Consumers and suppliers will split the burden of the tax. e. The government will collect more revenue if the tax is on the suppliers. f. Alcohol consumption will decrease more in the short-run than in the long-run. g. Alcohol consumption will decrease more in the long-run than in the short-run. h. There are positive externalities associated with consuming alcohol. i. Alcohol consumption will decrease only slightly in the short-run. j. Alcohol consumption will decrease more if the tax is the on the suppliers.
During the COVID-19 pandemic, alcohol consumption increased dramatically. In response, the government is considering increasing the tax rate on alcohol. It's known that the demand for alcohol is inelastic, and the supply of alcohol is perfectly elastic. Which of the following statements are true? (Select all that apply.)
Question 5Answer
A tax on alcohol is one way to make consumer internalize the cost of the externalities associated with drinking, such as long-term health implications.
Regardless of how the tax is implemented, consumers will pay the full amount of the tax.
It doesn't matter how the tax is implemented.
Consumers and suppliers will split the burden of the tax.
The government will collect more revenue if the tax is on the suppliers.
Alcohol consumption will decrease more in the short-run than in the long-run.
Alcohol consumption will decrease more in the long-run than in the short-run.
There are positive externalities associated with consuming alcohol.
Alcohol consumption will decrease more if the tax is the on the suppliers.
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