Microeconomics
Microeconomics
13th Edition
ISBN: 9781337617406
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 6.4, Problem 3ST
To determine

The government tax revenue and the inelastic demand of a good.

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Which of the following statements about the relationship between elasticity and tax incidence are true ?   Choose one or more:A.   A tax on a good for which both demand and supply are relatively inelastic will cause a relatively large transfer of welfare from consumers and producers to the government.   B.The incidence of a tax depends on who the tax is placed on.   C.If a tax is imposed on a good with a perfectly inelastic demand, then consumers bear the full incidence of the tax.   D.When demand is more inelastic than supply, producers bear more of the incidence of a tax.   E.When demand is more inelastic than supply, consumers bear more of the incidence of a tax.
Suppose that the supply of oil is elastic and demand for oil is inelastic. If the government taxes oil, who will bear most of the tax burden?
Neither the supply of nor the demand for a good is perfectly elastic or perfectly inelastic. Imposing a tax on the good results in a __________ in the price paid by buyers and _________ in the equilibrium quantity.
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