When Taxes Are Imposed on a Commodity

question 321

Multiple Choice

When taxes are imposed on a commodity,

• A)there is never a deadweight loss.
• B)some consumers alter their consumption by not purchasing the taxed commodity.
• C)tax revenue will rise by the amount of the tax multiplied by the before-tax level of consumption.
• D)the taxes do not distort incentives.

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Definitions:

Equipment Account

An account on a company's balance sheet that reports the value of the company's equipment used in operations, less any accumulated depreciation.

Posting

The process of recording financial transactions in the ledger of a company as part of the accounting cycle.

Trial Balance

A trial balance is a bookkeeping worksheet in which the balances of all ledgers are compiled into debit and credit account column totals that are equal.

Debits

Accounting entries that can increase asset or expense accounts or decrease revenue, liability, or equity accounts.