Suppose Buyers of Tequila Are Required to Send $1

question 84

Multiple Choice

Suppose buyers of tequila are required to send $1.00 to the government for every bottle of tequila they buy.Further,suppose this tax causes the effective price received by sellers of tequila to fall by $0.80 per bottle.Which of the following statements is correct?

• A) This tax causes the demand curve for tequila to shift downward by $1.00 at each quantity of tequila.
• B) The price paid by buyers is $0.20 per bottle more than it was before the tax.
• C) Eighty percent of the burden of the tax falls on sellers.
• D) All of the above are correct.

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Definitions:

Book Value

The value of an asset as it appears on the balance sheet, calculated by subtracting any associated depreciation or amortization from its original cost.

Machinery

This term refers to machines and equipment used in manufacturing processes to produce goods.

Fully Depreciated

A state where an asset's cost has been completely expensed over its useful life, reducing its book value to zero or salvage value.

Machinery

Tangible assets used in operations, such as production or manufacturing equipment, that have a useful life beyond one year.