Refer to the Following Graph

question 119

Multiple Choice

Refer to the following graph. Demand and supply are initially D and S1, respectively. Which of the following best describes the effect of a $0.50 per pound tariff on Danish hams imported into the United States?

• A)Supply shifts from S1 to S2; quantity sold rises to 100 thousand pounds and price paid by consumers declines to $1.75 a pound
• B)Neither supply nor demand shift, but price paid by consumers declines to $1.50 a pound while quantity sold remains at 80 thousand pounds
• C)Supply shifts from S1 to S0; quantity sold declines to 60 thousand pounds and price paid by consumers rises to $2.50 a pound
• D)Supply shifts from S1 to S0; quantity sold declines to 60 thousand pounds and price paid by consumers rises to $2.25 a pound

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Definitions:

Break-Even Sales

The amount of revenue required to cover a company's total fixed and variable costs, beyond which the company starts generating a profit.

Blue Division

A hypothetical division or business unit within a company, perhaps denoted for identification or strategic purposes.

Net Operating Income

The profit generated from a company's everyday operations, excluding income and expenses not related to its core activities.

Contribution Format

A statement or report format, primarily used in managerial accounting, that separates fixed and variable costs to evaluate the performance of a profit center.