Question 1
Your local government needs to increase tax revenue. To increase tax revenue it can either increase the property tax on commercial property or increase the property tax on all property. The government wants to impose the smallest excess burden possible. Because the demand for commercial property is ________ elastic than the demand for all property, you recommend that local government increase the property tax on ________ property.
◦ more; all
◦ less; all
◦ less; commercial
◦ more; commercial
Question 2
Refer to Scenario 19.4 below to answer the question(s) that follow.
SCENARIO 19.4: Suppose demand for widgets is given by the equation
P = 10 - 0.25
Q. Originally, the price of the good is $5 per unit. When a tax of $1 per unit is imposed, the price of the good rises to $6 per unit.
Refer to Scenario 19.4. How much total tax revenue is raised by the tax?
◦ $1
◦ $10
◦ $16
◦ $20
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