Suppose the elasticity of demand for Mexican food is 3.00 and the elasticity of supply is 1.20. If the government imposes a sales tax on Mexican food, which of the following occurs?
i. Less Mexican food is purchased by buyers.
ii. Less Mexican food is produced by sellers.
iii. The government receives the excess burden as revenue.
iv. Both the consumer surplus and the producer surplus decrease.
A) i and ii
B) iii only
C) i, ii, and iv
D) iv only
E) i, ii, iii, and iv
C
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