It Does Not Matter Whether a Tax Is Levied on the Buyers

question 14

Multiple Choice

It does not matter whether a tax is levied on the buyers or the sellers of a good because

• A)sellers always bear the full burden of the tax.
• B)buyers always bear the full burden of the tax.
• C)buyers and sellers will share the burden of the tax.
• D)None of the above is correct;the incidence of the tax does depend on whether the buyers or the sellers are required to pay the tax.

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Definitions:

Acquisition Differential

The difference between the cost of acquiring a company and the sum of the fair market values of the identifiable assets acquired minus liabilities assumed.

Equity Method

An accounting technique used to record investments in other companies, where the investment is initially recorded at cost and adjusted thereafter for the investor's share of the investee's net income or loss.

Patents

Intellectual property rights granted to an inventor, providing exclusive rights to use, sell, or manufacture the invention for a certain period.

Equipment

Tangible personal property used in operations, such as machinery or office hardware, that is not intended for sale.