Taxes Almost Always Cause Producer Prices to Decrease

question 61

Multiple Choice

Taxes almost always cause producer prices to decrease.How much they decrease depends on

• A) the elasticities of supply and demand.
• B) the amount of the tax.
• C) who is legally obligated to pay the tax.
• D) who pays the tax out of pocket.
• E) how often the government collects the tax.

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Definitions:

Total Cost Function

A mathematical relationship expressing the total cost of production as a function of the quantity of output.

Explicit Costs

Direct, out-of-pocket payments for wages, rent, materials, and other inputs required for the production of goods or services.

Implicit Costs

The opportunity costs of utilizing resources owned by the firm that could have been employed elsewhere, not directly paid out in cash.

Economies of Scale

The cost advantages that enterprises obtain due to their scale of operation, leading to a decreased cost per unit.