Q. With reference to “windfall tax” seen in the news recently consider the following statements:
1.It is a tax levied by governments against certain industries when economic conditions allow those industries to experience above-average profits.
2.The imposition of the tax makes the product costlier.
Select the correct statement using the code given below:
Answer: A
Notes:
Statement 1: A windfall tax is a tax levied by governments against certain industries when economic conditions allow those industries to experience above-average profits. Windfall taxes are primarily levied on companies in the targeted industry that have benefited the most from the economic windfall, most often commodity-based businesses.
Statement 2: The statement is incorrect. The tax is imposed on the above average profit made by the industry. Therefore, the price of the commodity will not have any effect.
