Question

1. suppose the supply of and demand for food are highly inelastic. based on this information, if the government decides to impose a tax on food we can expect the deadweight loss to be relatively small. 2. unprepared food is exempt from the sales tax in many states. this can be explained by noting that taxing food would select select exacerbate inequality relieve inequality relieve inequality and improve efficiency

Explanation:

1. When supply and demand are highly inelastic, quantity changes little with a tax. Dead - weight loss is the loss of total surplus due to market inefficiencies like a tax. With small quantity changes, dead - weight loss is small.
2. Unprepared food is a necessity. Lower - income households spend a larger proportion of their income on food. Taxing food would disproportionately affect them, exacerbating inequality. So, many states exempt it from sales tax.

Answer:

1. small
2. exacerbate inequality