What Is the Likely Effect of the Government Reducing the Supply

question 56

Multiple Choice

What is the likely effect of the government reducing the supply of illegal drugs?

• A)The total amount spent on drugs will decrease.
• B)The total amount spent on drugs will increase.
• C)The quantity of drugs consumed will remain unchanged.
• D)The demand for drugs will fall.
• E)The demand for drugs will increase.

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Definitions:

Tax Depreciation

The allowance for a decrease in the value of business assets for tax purposes, calculated under specific regulations and used to reduce taxable income.

Book Depreciation

The depreciation of an asset recorded in the financial statements of a business, calculated using the chosen depreciation method.

Tax Rate

The percentage at which an individual or corporation is taxed, which can vary depending on income level, type of tax, or jurisdiction.

Deferred Tax

A tax obligation that a company owes in the future due to timing differences between its taxable income and its accounting earnings.