When a Per Unit Tax Is Imposed on an Industry

question 6

Multiple Choice

When a per unit tax is imposed on an industry where the supply curve is perfectly elastic:

• A)consumers and producers share the tax.
• B)consumers pay the full amount of the tax.
• C)innovation is discouraged in that industry.
• D)producers pay the full amount of the tax.

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Definitions:

Direct Labor-Hours

A measure of the total hours worked directly on manufacturing goods or providing services, used in costing and operational efficiency analysis.

Labor-Related

Pertaining to costs, efforts, or issues directly associated with employees or workforce in the process of producing goods or services.

Activity Rate

The predefined cost-driver rate used in Activity-Based Costing to allocate overhead costs to products or services, based on each activity’s usage by those products or services.

Activity Cost Pool

A collection of overhead costs attributed to particular activities, used in activity-based costing to allocate costs more accurately to products or services.