Which of the Following Statements Is Correct Regarding the Imposition

question 23

Multiple Choice

Which of the following statements is correct regarding the imposition of a tax on gasoline?

• A)The incidence of the tax depends upon whether the buyers or the sellers are required to remit tax payments to the government.
• B)The incidence of the tax depends upon the price elasticities of demand and supply.
• C)The amount of tax revenue raised by the tax depends upon whether the buyers or the sellers are required to remit tax payments to the government.
• D)The amount of tax revenue raised by the tax does not depend upon the amount of the tax per unit.

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Definitions:

Commodity Futures

Financial contracts obligating the buyer to purchase an asset or the seller to sell an asset, like a physical commodity or a financial instrument, at a predetermined future date and price.

Interest Rate Parity

A financial theory which suggests that the difference in interest rates between two countries is equal to the expected change in exchange rates between their currencies.

Arbitragers

Traders who buy and sell assets, such as stocks or commodities, in different markets or forms to profit from differing prices for the same asset.

Risk-Free Profits

Profits made from an investment that is considered to have no risk of financial loss.