A Policy Maker Has Argued for Higher Taxes on Gasoline

question 28

Multiple Choice

A policy maker has argued for higher taxes on gasoline to reduce the negative externalities associated with driving. This policy will lead to a relatively ________ reduction in driving if demand is ________.

• A)small; perfectly elastic
• B)large; perfectly inelastic
• C)small; relatively inelastic
• D)large; relatively inelastic

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Definitions:

Direct Materials Cost

The cost of raw materials that are directly traceable to the production of a specific product.

Activity-Based Costing

A costing method that assigns costs to products or services based on the activities and resources required to produce them, aiming for more accurate cost allocation.

Direct Labor-Hours

The total hours of labor directly involved in manufacturing a product, which are often used to allocate manufacturing overhead costs to products.

Direct Materials Cost

The cost of raw materials and components that are directly used in the production of a product.