Assume That a 50 Percent Gasoline Tax Led to a Large

question 187

Multiple Choice

Assume that a 50 percent gasoline tax led to a large increase in its price and only a small decrease in the quantity of gasoline demanded.Economic analysis would lead one to conclude that

• A)gasoline should be taxed because the benefits of the tax would exceed the costs.
• B)gasoline should not be taxed because the benefits are uncertain.
• C) gasoline should not be taxed on ethical grounds since ethical benefits and costs can't be measured.
• D)the benefits of taxing gasoline is a normative issue. Economic analysis can be used to contribute to discussion of this issue but cannot decide it.

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Definitions:

Cost of Sales

refers to the direct costs attributable to the production of the goods sold in a company.

Increase in Accounts Receivable

A situation where the amount owed by customers for goods or services increases during a specific period, often indicating sales growth, but also potentially impacting cash flow.

Gross Profit

The difference between revenue and the cost of goods sold, indicating the basic profitability of a company's core activities.

Aging of Accounts Receivable

A report or method that categorizes a company's accounts receivable according to the length of time an invoice has been outstanding.