Recently,the government considered adding an excise tax on CDs that can be used to record music and CD players that can record discs.If this tax were enacted,the MOST likely effect would be:

A) that consumers would pay a higher price and producers would sell fewer of these CDs and CD players than before the tax.
B) no change in consumption or the prices paid by consumers of these CDs and CD players.
C) that consumers would pay a lower price and producers would receive a higher price for these CDs and CD players than before the tax.
D) an increase in economic activity due to the tax.

Question

chicken nugget · Accepted Answer

Final Answer : A, Explanation :  When an excise tax is added to a product, the producer has to pay the tax, which increases their cost of production. This increase in cost is then passed on to the consumer in the form of a higher price. As a result of the higher price, consumers are likely to buy fewer of these CDs and CD players than before the tax, leading to a decrease in sales for producers. Therefore, the most likely effect of this tax would be that consumers would pay a higher price and producers would sell fewer of these CDs and CD players than before the tax.

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