Asked by Jarrar gilani on Mar 10, 2024
Verified
If the government wants to limit sales of a particular good,it may do so by imposing a quota.However,the same reduction in sales may be achieved by an appropriately chosen excise tax.
Quota
A limited quantity of a particular product that under official controls can be produced, exported, or imported.
Excise Tax
A tax charged on specific goods and services, such as tobacco and alcohol, often imposed to discourage their use or to generate revenue.
Sales
The exchange of a commodity for money; the action of selling something.
- Understand the concept of tax neutrality and the conditions under which taxes do not distort market outcomes.
Verified Answer
CW
Cailey Wray-FritscheMar 10, 2024
Final Answer :
True
Explanation :
A quota limits the physical amount of a particular good that can be produced and sold, while an excise tax increases the cost of producing and selling a particular good. Both methods can achieve a reduction in sales, but an excise tax can also generate revenue for the government.
Learning Objectives
- Understand the concept of tax neutrality and the conditions under which taxes do not distort market outcomes.
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