When Taxes Are Imposed on a Commodity

question 321

Multiple Choice

When taxes are imposed on a commodity,

• A)there is never a deadweight loss.
• B)some consumers alter their consumption by not purchasing the taxed commodity.
• C)tax revenue will rise by the amount of the tax multiplied by the before-tax level of consumption.
• D)the taxes do not distort incentives.

Be aware of the principles of U.S. trade policy regarding tariffs and trade barriers.

Differentiate between fair trade and free trade in the context of labor, environmental, and public health standards.

Identify the role and goals of the International Labour Organization (ILO).

Recognize the importance of labor standards and collective bargaining rights in global trade agreements.

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Definitions:

Fixed Cash Receipts

Fixed Cash Receipts refer to the regular, unchanging amount of cash received by a business or individual, typically structured within certain financial arrangements or revenue models.

Discount Rate

The interest rate used in discounted cash flow analysis to determine the present value of future cash flows.

Lag Strategy

A deliberate decision to not be a first mover in an industry or market, observing and reacting to competitors' actions.

Straddle Strategy

A trading strategy that involves purchasing both a call option and a put option for the same underlying asset, with the same strike price and expiration date, allowing investors to benefit from significant price movements in either direction.