Suppose Buyers of Tequila Are Required to Send $1

question 84

Multiple Choice

Suppose buyers of tequila are required to send $1.00 to the government for every bottle of tequila they buy.Further,suppose this tax causes the effective price received by sellers of tequila to fall by $0.80 per bottle.Which of the following statements is correct?

• A) This tax causes the demand curve for tequila to shift downward by $1.00 at each quantity of tequila.
• B) The price paid by buyers is $0.20 per bottle more than it was before the tax.
• C) Eighty percent of the burden of the tax falls on sellers.
• D) All of the above are correct.

---

Definitions:

Indirect Method

An approach used in cash flow statements to adjust net income for non-cash transactions and changes in working capital to calculate operating cash flow.

Operating Activities

Activities that constitute the primary or main activities of a business, including the production, sale, and delivery of its products and services.

Direct Method

A way of preparing the cash flow statement in which actual cash receipts and payments are reported, rather than adjusting net income for changes in non-cash accounts.

Net Cash Flow

The amount of cash generated or lost over a period, taking into account cash inflows from operations, investments, and financing.