When a Tax on a Good Starts Small and Is

question 32

Multiple Choice

When a tax on a good starts small and is gradually increased, tax revenue will

• A) fall.
• B) rise.
• C) first rise and then fall.
• D) first fall and then rise.
• E) not change at all

---

Definitions:

Short-Term Pricing Decisions

Pricing strategies and choices made by a business to address immediate market demands, competitive pricing, or product lifecycle stages.

Total Variable Costs

The sum of all costs that vary directly with the level of production or sales volume, such as materials and labor costs.

Variable Costing Income Statement

An income statement format that only includes variable costs as cost of goods sold and uses contribution margin to analyze profitability.

Absorption Costing Format

An accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a product.