Refer to Scenario 19

question 276

Multiple Choice

Refer to Scenario 19.4 below to answer the question(s) that follow.
SCENARIO 19.4: Suppose demand for widgets is given by the equation P = 10 - 0.25Q. Originally, the price of the good is $5 per unit. When a tax of $1 per unit is imposed, the price of the good rises to $6 per unit.
-Refer to Scenario 19.4. What is the excess burden of the tax?

• A) $2
• B) $18
• C) $32
• D) $50

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Definitions:

Rate Of Return

The gain or loss on an investment over a specified period, expressed as a percentage of the investment’s initial cost.

Compounded Quarterly

A method where interest is calculated and added to the principal amount four times a year.

Economic Advantage

A benefit that gives an individual, business, or country a superior position in economic activities.

Motorcycle

A two-wheeled vehicle powered by an engine, designed for individual or dual riders.