Typically, When Government Imposes an Ad Valorem or a Specific

question 146

Multiple Choice

Typically, when government imposes an ad valorem or a specific tax on producers,

• A)both consumer surplus and producer surplus are reduced.
• B)producer surplus is reduced to zero.
• C)consumer surplus is reduced to zero.
• D)consumer surplus is preserved because producers must pay the tax.
• E)producer surplus is preserved because costs are passed on to consumers.

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Definitions:

Physical Units

A measure of quantity, such as items or pieces, used to quantify the inventory, output, or production level of a business.

FIFO Method

An inventory valuation method where the first items acquired are the first ones sold or used, standing for First In, First Out.

Average Cost Method

An inventory costing method where the cost of goods sold and ending inventory values are determined by averaging the costs of all items available for sale during the period.

Average Costing

An inventory costing method where all units are valued at the average cost of all similar items in the inventory.