Suppose Buyers of Liquor Are Required to Send $1

question 413

Multiple Choice

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

• A) This tax causes the demand curve for liquor to shift downward by $1.00 at each quantity of liquor.
• 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:

Purchase Cost

The amount paid to acquire goods or services, including the price of the item(s) and associated costs such as shipping and handling.

Manufacturing Overhead

All indirect costs associated with the production process, such as utilities, rent for production facilities, and maintenance expenses.

Factory Equipment

Machinery and tools used in a manufacturing process to produce goods.

Indirect Material

Materials used in the production process that do not end up as part of the final product, such as lubricants for machinery.