Exhibit 20-6 -Refer to Exhibit 20-6.Suppose the Three Equilibrium Quantities Are 700,800,and

question 17

Multiple Choice

Exhibit 20-6

-Refer to Exhibit 20-6.Suppose the three equilibrium quantities are 700,800,and 900,and the two equilibrium prices are $2.20 and $2.75.What is the tax revenue collected from the tax that shifted S₁ to S₂ when D₂ is the relevant demand curve?

• A) $440
• B) $600
• C) $800
• D) $900

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Definitions:

In The Money

A term referring to an option contract that has intrinsic value. For call options, this means the underlying asset price is above the strike price, and for put options, it means the underlying asset price is below the strike price.

Call

A stock market option that gives the holder the right to buy shares at a specified price within a specific time period.

Put

A financial contract giving the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a predetermined price within a specified time frame.

Conversion Value

The financial value of converting a convertible security, like a convertible bond, into its underlying equity at the current market price.