There Is a Difference Between Who Is Legally Required to Send

question 23

Multiple Choice

There is a difference between who is legally required to send a tax payment to the government and who bears the burden of the tax. Which of the following would have the most impact on who bears the burden of an excise tax?

• A) whether the tax is imposed by the federal government or a state government
• B) whether the tax is based on the ability-to-pay principle or the benefits-received principle
• C) The motive for the tax. If the tax is designed to raise revenue, more of the burden will fall on firms. If the tax is designed to achieve a social objective (for example, to discourage smoking) more of the burden will fall on consumers.
• D) The elasticity of demand for the item that is taxed.

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Definitions:

Step-Wise Cost

Costs that remain fixed for certain levels of production but can change to a different fixed rate when production levels increase or decrease.

Least-Squares Regression

A statistical method used to determine the line of best fit by minimizing the sum of squares of the differences between observed and predicted values.

Relevant Range

Pertains to the bounds within which assumptions about fixed and variable costs in relation to business activities are considered accurate.

Departmental Overhead Rate

A calculation used to allocate indirect costs to specific departments, helping in the accurate costing of products or services.