Post Utme Eksu 2018 Economics Question 16

Practice objective / multiple choice question 16 from the 2018 Post Utme Eksu Economics examination.

Post Utme Eksu 2018 Economics Objective / Multiple Choice
Question 16 POST_UTME_EKSU • 2018 • ECONOMICS • objective

Consider a country with a mixed economy, where the government imposes a tax on luxury goods. The tax revenue is used to fund public goods and services. Assuming the tax rate is 20% and the demand for luxury goods is elastic, what is the effect of the tax on the equilibrium price and quantity of luxury goods?

Answer Options

Correct Answer A. The tax will increase the equilibrium price and decrease the equilibrium quantity of luxury goods.
B. The tax will decrease the equilibrium price and increase the equilibrium quantity of luxury goods.
C. The tax will have no effect on the equilibrium price and quantity of luxury goods.
D. The tax will increase the equilibrium price and increase the equilibrium quantity of luxury goods.
Correct Answer
A
Correct Option:
The tax will increase the equilibrium price and decrease the equilibrium quantity of luxury goods.

About This Question

This is Post Utme Eksu 2018 Economics Question 16. It is one of the objective questions from the 2018 Post Utme Eksu Economics examination.

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