Asked by Abena Opoku on Jul 06, 2024
Verified
The Clinton administration has recommended an increase in the tax on yachts to help pay for government programs. Which of the following is true?
A) The burden of this tax will fall entirely on yacht consumers.
B) The burden of this tax will fall entirely on yacht manufacturers.
C) The sales of yachts will decrease.
D) The profit of yacht manufacturers will increase.
E) Employment of workers in the yacht industry will increase.
Yacht Industry
The sector of the economy that is involved in the design, construction, and sale of yachts, ranging from luxury to small racing models.
Tax Burden
The measure of taxes that an individual or entity must bear, often expressed as a percentage of income or GDP.
Government Programs
Initiatives and services provided by the government, funded by government revenue, to meet public needs.
- Calculate the impact of taxes and subsidies on consumer and producer surplus.
Verified Answer
NM
Nuriddin MakhmudovJul 11, 2024
Final Answer :
C
Explanation :
When a tax on a specific good is increased, the demand for that good typically decreases because it is more expensive for consumers to purchase. Therefore, the sales of yachts will likely decrease if the tax is increased, as fewer people will be willing to pay the higher price.
Learning Objectives
- Calculate the impact of taxes and subsidies on consumer and producer surplus.