When a per-unit tax is imposed on a market, the side of the market that is less price elastic generally bears:
Correct answer: B. A larger share of the tax
- A. A smaller share of the tax
- B. A larger share of the tax
- C. No share of the tax
- D. The entire tax by definition
Explanation
The less elastic side has fewer practical alternatives and therefore is less able to change its quantity. It bears the larger share of the tax burden, regardless of whether the tax is legally charged to buyers or sellers.
Last updated
About Microeconomics
Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
Practise Microeconomics
38 free Microeconomics MCQs from Economics, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Exams that ask Economics questions like this
Economics is on this paper prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for it.
Related questions
A factory imposes pollution costs on nearby residents that are not included in its private production costs. At the efficient output, which condition is expected?
A firm has fixed cost of Rs. 100 and variable cost of Rs. 300 when it produces 20 units. What is its average total cost?
A firm in a perfectly competitive market faces a horizontal demand curve mainly because it:
A firm's economic profit is zero when its total revenue is equal to its:
A monopolist can successfully practise price discrimination only when it can: