-Refer to Exhibit 11-5 which summarizes the situation prior to the value added tax (VAT).The value added by the farmer is ______________.If the government imposes a VAT rate of 10 percent,the farmer must pay ___________ in VAT tax and will need to raise the price he charges the miller to _______________.
A) $0.60; $0.06; $0.66
B) $0.80; $0.08; $0.88
C) $1.40; $0.14; $1.54
D) $0.60; $0.60; $1.20

Question

-Refer to Exhibit 11-5 which summarizes the situation prior to the value added tax (VAT).The value added by the farmer is ______________.If the government imposes a VAT rate of 10 percent,the farmer must pay ___________ in VAT tax and will need to raise the price he charges the miller to _______________.
A) $0.60; $0.06; $0.66 
B) $0.80; $0.08; $0.88 
C) $1.40; $0.14; $1.54 
D) $0.60; $0.60; $1.20

Quizplus · Accepted Answer

The value added by the farmer is the difference between the sale price to the miller and the cost of inputs, which is $0.60. With a 10% VAT, the tax is $0.06, leading to a new sale price of $0.66 to the miller.

-Refer to Exhibit 11-5 Which Summarizes the Situation Prior to the Value