Refer to the Graph Shown

question 176

Multiple Choice

Refer to the graph shown. Assume the market is initially in equilibrium at point b in the graph but the imposition of a per-unit tax on this product shifts the supply curve up from S₀ to S₁. The amount of revenue government will collect from this tax is equal to the:

• A)amount of the per-unit tax multiplied by Q₁.
• B)amount of the per-unit tax multiplied by Q₂.
• C)area of the triangle abc.
• D)area of the triangle bcd.

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Definitions:

Beta

A measure of a stock's volatility in relation to the overall market; a beta greater than 1 indicates higher volatility, and less than 1 indicates lower volatility.

Price Takers

Market participants who accept the prevailing prices in the market for their products or services because they have no power to influence those prices.

Holding Period

The amount of time an investment is held by an investor before being sold.

Risk-Free Rate

The theoretical rate of return of an investment with zero risk, often represented by the yield on government bonds like U.S. Treasury notes.