How Is an Increase in Taxes Likely to Affect a fiRm's

question 61

Multiple Choice

How is an increase in taxes likely to affect a firm's profitability?

• A) A higher tax rate will lead to lower revenues and profits.
• B) An increase in the tax rate will increase the demand for the firm's products.
• C) A higher tax rate increases costs and lowers profits.
• D) With a higher tax rate, the market price of the good is likely to fall.