Suppose That a Tax of $2 Per Unit of Output

question 100

Multiple Choice

Suppose that a tax of $2 per unit of output is imposed on red rubber ball producers. What level of output maximizes profit?

• A) -1
• B) 3
• C) 4.5
• D) 5
• E) B, C, and D are correct.

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Definitions:

Net Loss

The amount by which total expenses exceed total revenues for a business, indicating a financial loss.

Income Summary Account

An account used in closing process to aggregate all income and expenses accounts before determining and transferring the net income or loss to the capital account.

Adjusting Entries

Entries recorded at the conclusion of an accounting period to adjust the balances of accounts prior to the compilation of financial statements.

Income Statement Accounts

Accounts used to record transactions affecting a company’s income, expenses, and the resulting net income or loss over a period of time.