Suppose That a Tax Is Placed on Textbooks

question 156

Multiple Choice

Suppose that a tax is placed on textbooks. If the buyers end up bearing most of the tax burden, this indicates that the

• A) demand is more inelastic than the supply.
• B) supply is more inelastic than the demand.
• C) government has required that buyers remit the tax payments.
• D) Government has required that buyers remit the tax payments.

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Definitions:

Variable Cost

Costs that change in proportion to the level of activity or volume of production, such as raw materials or sales commissions.

Prime Cost

The combined costs of direct materials and direct labor that are directly involved in the manufacturing of a product.

Direct Labor

The wages and salaries of employees who are directly involved in the production of goods or services.

Manufacturing Overhead

All manufacturing costs that are not directly associated with the production of goods, such as utilities, rent, and salaries for managers.