RudeyboyZ wrote:
When the government taxes the sale of a particular type of good, either the producers of the good receive less profit, or the consumers must pay a higher price for the good, or both. If the consumers must pay a higher price, then they will demand less of that good and more of all other goods.
Q:If the above statements are true, and increased demand for a good leads to a higher price for that good, which of the following statements must also be true?
A: If the price of pencils rises and the government taxes the sale of ballpoint pens, then the producers of pens do not receive less profit.
B: If the government taxes the sale of coconuts and the price of bananas remains constant, then the producers of coconuts receive less profit.
C: If the price of coffee falls and consumers demand more tea, then the government repealed a tax on the sale of tea.
D: If the government taxes the sale of cigarettes and consumers demand more bourbon, then consumers must pay a higher price for cigarettes.
E: If consumers demand more bicycles and the producers of automobiles receive less profit, then the government taxes the sale of automobiles.
Hi,
if one looks at the logic..
higher price results in less demand and increase in higher demand of other materials say A...
also higher demands of A means
higher price for A so as per above rule its demand must come down... so it seems the logic here conveys that no one will be able to sustain more demand for a long time
but anyway my try of the Q is as under,..
B: If the government taxes the sale of coconuts and the price of bananas remains constant, then the producers of coconuts receive less profit.
this goes perfectly fine with the logic given..
since taxes are levied on coconuts, either the producer takes less profit initially itself or he passes the increase to consumers ..
now the consumers will demand less of coconut and more of bananas as its price are constant..
It is given tht incr in price means less profit so again the producers of coconut will recieve less profit