Which of the following statements about excise taxes is TRUE?

Question

Quizplus · Accepted Answer

Excise taxes are imposed on specific goods or services, and they increase the production costs for producers. As a result, producers may increase the price of the good or service to maintain their profit margins. However, consumers may also bear part of the tax burden if demand is not elastic enough to absorb the price increase. Thus, both consumers and producers pay part of the excise tax. Option A is incorrect because producers may bear some of the tax burden. Option B is incorrect because the equilibrium price and quantity will be affected by an excise tax. Option D is incorrect because consumers will most likely not refuse to pay excise taxes, but they may adjust their consumption habits in response to the price increase.

Which of the Following Statements About Excise Taxes Is TRUE