Refer to the Figure Below

question 32

Multiple Choice

Refer to the figure below. Assume the production of the product imposes a cost on society of €7.00 per unit. If the free market equilibrium output is 50 units, the government should

• A) impose a tax of €2.50 per unit.
• B) reduce the output of the firm by approximately 39 units.
• C) impose a lump-sum tax of €350 per period.
• D) impose a tax of €7.00 per unit.

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Definitions:

Residual Income

The excess of divisional income from operations over a “minimum” acceptable income from operations.

Return On Investment

A performance measure used to evaluate the efficiency or profitability of an investment, calculated by dividing the profit of an investment by its cost.

Income From Operations

Income from operations refers to the profit realized from a firm's core business activities, excluding deductions for interest and taxes.

Office Salaries Expense

The costs associated with paying salaries to administrative and office employees.