If the Government Eliminates a Tax on a Good with a Perfectly

question 158

Multiple Choice

If the government eliminates a tax on a good with a perfectly elastic supply,who benefits most?

• A) buyers
• B) sellers
• C) buyers if the demand is also perfectly elastic, otherwise sellers
• D) buyers if the demand is unit elastic, otherwise sellers
• E) Buyers and sellers benefit equally.

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Definitions:

Unit Costs

The cost incurred to produce, store, and sell one unit of a product, including direct materials, labor, and overhead expenses.

Variable Costing

A costing method that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product costs.

Direct Labor

The wages and salaries paid to workers who are directly involved in the production of goods or the provision of services.

Variable Manufacturing Overhead

The portion of manufacturing overhead costs that varies with production volume, such as utility costs in a factory.