A tax levied on a business will:
A) reduce the profits of owners.
B) reduce the wages of workers.
C) increase the prices paid by consumers.
D) result in any or all of the above actions depending upon the market conditions the firm faces.

Question

Quizplus · Accepted Answer

The impact of a tax on a business depends on various market conditions, such as the elasticity of demand for the product, the competitiveness of the market, and the ability of the business to pass on the tax to the consumers. If the demand for the product is elastic, and the business cannot pass on the tax to the consumers, then it may reduce its profits. If the market is competitive, and the business cannot pass on the tax, then it may reduce its wages to maintain its profit margins. Lastly, if the business can pass on the tax to the consumers, then it will increase the prices paid by consumers. Thus, a tax on a business may result in any or all of the above actions, depending on the market conditions.

A Tax Levied on a Business Will