What Happens When the Government Imposes a Unit Excise Tax

question 198

Multiple Choice

What happens when the government imposes a unit excise tax on a good?

• A) The amount of the tax is added to the current equilibrium price.
• B) The demand for the newly taxed good decreases.
• C) That good's supply curve shifts down by the amount of the tax.
• D) The newly taxed good's supply curve shifts vertically upward by the amount of the per-unit tax being levied.

---

Definitions:

Intangible Asset

An asset without physical substance that holds value for a business, such as patents, trademarks, and copyrights.

Amortization

The process of spreading the cost of an intangible asset over its useful life for accounting and tax purposes.

Indefinite Life

An accounting term for assets that are not subject to depreciation due to their perpetual existence or usefulness.

Outstanding Common Stock

Shares that are issued by a company and held by investors, excluding any shares held as treasury stock by the company itself.