-If the Government Puts a $2 Excise Tax on a Product

question 127

Multiple Choice

-If the government puts a $2 excise tax on a product and as a result,price rises by $0.75,which of the following statements is correct?

• A)The sellers pay more of the tax than the buyers.
• B)The buyers pay more of the tax than the sellers.
• C)The government's tax revenue falls.
• D)The quantity demanded of the product falls by 37.5%.
• E)The quantity demanded of the product rises by 37.5%.

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Definitions:

Cost of Goods Sold

Direct expenditures involved in the making of a company's sold products, which includes labor and material costs.

Freight Out

The cost of transporting goods from a seller's premises to the buyer's location, typically recorded as a selling expense by the seller.

Transportation to Consignees

The costs incurred to transport goods to consignees, who will sell the goods on behalf of the shipping party.

Cost Recovery Method

An accounting technique used to defer the recognition of income until the cash received from a transaction exceeds the costs associated with it.