-Refer to Exhibit 11-5 which summarizes the situation prior to the value added tax (VAT).If the government imposes a VAT rate of 10 percent,the government will receive ___________ in VAT revenue per loaf of bread sold and the final consumer will find that he has to pay _______________ more for a loaf of bread than he did prior to the VAT tax.
A) $0.25; $2.53
B) $0.11; $2.75
C) $0.25; $0.25
D) $0.03; $2.75

Question

-Refer to Exhibit 11-5 which summarizes the situation prior to the value added tax (VAT).If the government imposes a VAT rate of 10 percent,the government will receive ___________ in VAT revenue per loaf of bread sold and the final consumer will find that he has to pay _______________ more for a loaf of bread than he did prior to the VAT tax.
A) $0.25; $2.53 
B) $0.11; $2.75 
C) $0.25; $0.25 
D) $0.03; $2.75

Quizplus · Accepted Answer

A VAT is a type of consumption tax that is placed on a product whenever value is added at a stage of production and at the point of retail sale. The amount of VAT that the user pays is on the cost of the product, less any of the costs of materials used in the product that have already been taxed. Therefore, the government receives the VAT revenue from each stage of production (which cumulatively should add up to the final VAT amount on the end product), and the final consumer will pay the full VAT rate on the final purchase price, making both parts of the statement true for option C.

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