Question

If an excise tax is imposed on restaurant meals, a. fewer meals will be produced and sold b. more meals will be produced and sold c. the government's tax revenue will fall d. the market price of meals will decrease e. restaurants will sell more meals, but at a lower price per meal

Answer 1

Correct option is (a)

Step-by-step explanation:

Excise tax is an indirect tax which is not imposed on customers directly. Excise tax is imposed on producers or sellers for goods produced and they in turn transfer the burden of tax on customers in the form of higher prices. That is why, it is called indirect tax.

It is usually imposed on those goods such as liquor and tobacco whose consumption the Government needs to decrease. If excise tax is imposed on restaurant meals, then the restaurant will be able to produce and sell less at the same price it was charging earlier. If the restaurant wishes to sell more, then it will have to charge higher price.