If a New Unit Excise Tax Is Levied on Bottles

question 117

Multiple Choice

If a new unit excise tax is levied on bottles of wine, the

• A)demand for wine shifts to the left.
• B)demand for wine shifts to the right.
• C)supply of wine shifts to the right.
• D)supply of wine shifts to the left.

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Definitions:

Variable Production Costs

Costs that vary directly with the level of production, such as raw materials and direct labor.

Absorption Costing

This approach to bookkeeping encompasses all production-associated expenses, including direct materials, direct labor, and all manufacturing overheads, both variable and fixed, in calculating the product's price.

Operations

Refers to the ongoing activities of a business involved in the production or provision of goods and services.

Variable Costing

An accounting method that includes only variable production costs (materials, labor, and overhead) in the cost of goods sold, treating fixed costs as period expenses.