-The Graph Shows the Market for Textbooks

question 22

Multiple Choice

-The graph shows the market for textbooks. If the government introduces a tax of $20 a textbook, then the price paid by buyers

• A) increases to $80 a textbook.
• B) increases by $20.
• C) decreases to $60 a textbook.
• D) is $70 a textbook.
• E) does not change because the demand for textbooks is perfectly elastic.

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Definitions:

Compensating Balance

A compensating balance is a minimum account balance that a borrower must maintain with a lender as part of the loan agreement.

Effective Interest Rate

The real rate of interest earned or paid on an investment or loan, taking into account the effect of compounding.

Pledging Receivables

Borrowing money using receivables as collateral.

Effective Cost

The total cost of a financing option, including all fees and interest, adjusted for any discounts or premiums, providing a true comparison of costs.