6. Some critics of tax increases oncigarettes suggest that an increase in the ta

Question

6.   Some critics of tax increases oncigarettes suggest that an increase in the tax will reduce therevenue that the government collects. For low- and middle-incomecountries, is this likely? (Assume that taxes account for one halfof the retail price of cigarettes and that the entire amount of thetax increase shows up as an increase in the retail price.) A.   Yes. With a 10% tax increase, taxrevenue should fall. B.   No. With a 10% tax increase, taxrevenue should increase. C.   Uncertain. From the information inthis article, you can't tell what the effect would be on taxrevenue.

Explanation / Answer

Answer B- No with a 10%increase,tax revenue should increase.

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