One way to minimize the excess burden resulting from a specific tax is to:
A)tax only wealthy firms and individuals.
B)spread the tax over many goods and services.
C)tax goods for which either supply or demand is inelastic.
D)tax luxury items such as yachts and sports cars.

Question

Quizplus · Accepted Answer

Taxing goods for which either supply or demand is inelastic means that the tax will not significantly affect the behavior of consumers or producers, resulting in less excess burden. Goods with inelastic demand or supply are necessities or have no close substitutes, so consumers and producers are less able to adjust to the tax. As a result, the tax burden is mostly borne by the buyer or seller, minimizing the excess burden.

One Way to Minimize the Excess Burden Resulting from a Specific