Refer to the Graph Shown

question 104

Multiple Choice

Refer to the graph shown. The amount of a tax sufficient to reduce quantity supplied to the level that individuals would have supplied had they included the cost in their decision on third parties is:

• A)$2.50.
• B)$1.70.
• C)$1.00.
• D)$0.80.

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Definitions:

Market Price

The current price at which an asset or service can be bought or sold.

Put Option

A financial derivative that gives the holder the right, but not the obligation, to sell a specified quantity of an underlying asset at a set price within a specified time.

Strike Price

The set price at which the holder of an options contract can buy (in the case of a call) or sell (in the case of a put) the underlying asset.

Market Price

The present value at which a good or service may be purchased or sold in a market.