When a Tax Is Imposed on a Good for Which

question 29

Multiple Choice

When a tax is imposed on a good for which the demand is relatively elastic and the supply is relatively inelastic,

• A)buyers of the good will bear most of the burden of the tax.
• B)sellers of the good will bear most of the burden of the tax.
• C)buyers and sellers will each bear 50 percent of the burden of the tax.
• D)the effective price paid by buyers will decrease as a result of the tax.

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Definitions:

Equity Transaction

Transactions that affect the ownership interest of shareholders in a company, including issues, buybacks, and sale of shares.

Incremental Costs

Costs directly associated with the production of additional units of goods or services.

Net Of Tax

The amount remaining after the effect of taxes has been accounted for.

Contingent Asset

A possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.