Exhibit 20-7

-Refer to Exhibit 20-7.If the government wants to impose a per-unit tax in order to raise revenues,which of the depicted markets should it choose in order to maximize tax revenues?
A) (1)
B) (2)
C) (3)
D) (4)

Question

Exhibit 20-7
 
-Refer to Exhibit 20-7.If the government wants to impose a per-unit tax in order to raise revenues,which of the depicted markets should it choose in order to maximize tax revenues?
A) (1) 
B) (2) 
C) (3) 
D) (4)

Quizplus · Accepted Answer

The government should choose the market with the most inelastic demand, as consumers will continue to buy similar quantities despite the tax, maximizing revenue. Market (1) likely has the most inelastic demand.

Exhibit 20-7 -Refer to Exhibit 20-7.If the Government Wants to Impose a Wants