Refer to Scenario 19

question 266

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. Prior to the imposition of the tax consumer surplus was ________ and after the tax was imposed consumer surplus was ________.

• A) $50; $32
• B) $32; $50
• C) $100; $65
• D) $25; $16

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Definitions:

Sales Price Variance

The difference between the actual sales price of a product and its expected (or standard) sales price.

Sales Volume Variance

The difference between the actual quantity sold and the budgeted quantity sold, multiplied by the standard selling price per unit.

Purchasing Department

The division within a company responsible for acquiring goods and services necessary for the business operations.

Price Paid

The total monetary expenditure incurred to acquire a product or service, which includes the purchase price and any additional costs.