When a Product Is Taxed

question 120

Multiple Choice

When a product is taxed,

• A) part of the initial consumer surplus goes to the government as revenue.
• B) part of the initial consumer surplus becomes a deadweight loss.
• C) the producer surplus never changes because consumers pay taxes, not producers.
• D) Both answers A and B are correct.
• E) Both answers B and C are correct.

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Definitions:

Financial Accounting Standards Board

A stand-alone body in charge of setting and refining standards for financial accounting and reporting in the USA.

Generally Accepted Accounting Principles

A framework of accounting standards, principles, and procedures that companies must follow when compiling their financial statements, ensuring transparency and uniformity across industries.

Public Company Accounting Oversight Board

A nonprofit organization established by Congress to oversee the audits of public companies to ensure the accuracy and integrity of financial statements.