QUESTION 3
Which of the following statements correctly describes the relationship between the size of the dead weight loss, (DWL), and the amount of
tax revenue as the size of the tax rate increases from a small tax rate to a medium rate to a large tax?
a. Both the size of the DWL and tax revenue increase.
b. The size of the DWL increases, but tax revenue decreases.
c. The size of the DWL increases, but tax revenue first increases, then decreases.
d. Both the size of the DWL and tax revenue decrease.

You receive a memo from the vice president of procurement responding to your query. he writes: “it will be very important to maintain product continuity. we have a large base of devoted customers. we want to make sure that the quality and key characteristics of island knight stay the same through this transition. talk to frank, our consulting professional perfumer, for more information about the cologne. seasonal variations in costs are the single most significant factor in our deciding to go with another supplier, so finding a way to limit that should be the top priority. the overall marginal costs and shipping costs are probably somewhat less significant. you may want to talk to cindy, the product manager for island knight, regarding pricing information about the product.” what is the best action to take next?