In Order to Discourage Consumers from Eating Unhealthy Fast Food

question 39

Multiple Choice

In order to discourage consumers from eating unhealthy fast food, the government is considering placing a tax on all fast food sales. Which of the following statements is true?

• A) Given the numerous alternatives, consumers' demand for fast food is relatively elastic and the tax will likely work to discourage fast food consumption.
• B) The tax on fast food will likely raise considerable revenue but will be unlikely to reduce the consumption of fast food by consumers.
• C) The tax on fast food will likely increase the demand for home cooked meals.
• D) Both A and C are true.

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Definitions:

Privately Held Corporation

A corporation that has only a few stockholders and whose stock is not available for sale to the general public.

Retained Earnings

The portion of a company's net income that is not distributed as dividends to shareholders but retained for reinvestment in the business or to pay off debt.

Paid-In Capital

The amount of money that a company receives from shareholders in exchange for shares of stock, exceeding the par value of the shares.

Drawings

Withdrawal of cash or other assets from an unincorporated business for the personal use of the owner(s).