Assume a Unit Tax of $4 Is Placed on Suppliers

question 18

Multiple Choice

Assume a unit tax of $4 is placed on suppliers.They are able to pass along some of the tax to suppliers as evidenced by prices rising from $5 per unit to $7 per unit.Output declines from 10 units to 8 units.What is the ratio of the demander's share of the tax burden to the suppliers?

• A)2.5
• B)2.0
• C)1.5
• D)1.0

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Definitions:

Net Income

The remaining profit for a company after deducting taxes and expenses from the revenue.

Consolidation Entry

A journal entry used in the preparation of consolidated financial statements to eliminate intercompany transactions and balances.

Retained Earnings

The portion of net income that is retained by the company rather than distributed to its shareholders as dividends.

Equity Method

An accounting technique used to record investments in other companies, recognizing income based on the investee's profit or loss.