Suppose the Demand Curve for a Product Is Vertical and the Supply

question 179

Multiple Choice

Suppose the demand curve for a product is vertical and the supply curve is upward sloping.If a unit tax is imposed in the market for this product,

• A)sellers bear the entire burden of the tax.
• B)buyers bear the entire burden of the tax.
• C)the tax burden will be shared equally between buyers and sellers.
• D)buyers share the burden of the tax with the government.

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Definitions:

Transfer Price

The price at which divisions of a company transact with each other, such as the sale of goods or services, often used for budgeting and tax purposes.

Decentralization

The process of distributing or dispersing functions, powers, people, or things away from a central location or authority.

Operating Costs

Expenses associated with the day-to-day operations of a business, excluding the cost of raw materials and direct labor.

Cost Center

A department within an organization that does not directly add to profit but still incurs costs, such as HR or customer service departments.