Recently,the Government Considered Adding an Excise Tax on CDs That

question 143

Multiple Choice

Recently,the government considered adding an excise tax on CDs that can be used to record music and CD players that can record discs.If this tax were enacted,the MOST likely effect would be:

• A)that consumers would pay a higher price and producers would sell fewer of these CDs and CD players than before the tax.
• B)no change in consumption or the prices paid by consumers of these CDs and CD players.
• C)that consumers would pay a lower price and producers would receive a higher price for these CDs and CD players than before the tax.
• D)an increase in economic activity due to the tax.

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Definitions:

Current Assets

Current assets are short-term, liquid assets that a company owns and are expected to be converted into cash, sold, or consumed within one year or within a business's operating cycle, whichever is longer.

Acid-Test Ratio

A financial metric that measures a company's ability to pay its short-term liabilities with its quick assets (cash, marketable securities, and receivables).

Prepaid Expenses

Expenses paid in advance for goods or services to be received in the future, recognized as assets on a company's balance sheet until they are consumed or used.

Current Liabilities

Short-term financial obligations that are due within one year or within a normal operating cycle.