Suppose There Is Currently a Tax of $50 Per Ticket

question 145

Multiple Choice

Suppose there is currently a tax of $50 per ticket on airline tickets.Buyers of airline tickets are required to pay the tax to the government.If the tax is reduced from $50 per ticket to $30 per ticket,then the

• A) demand curve will shift upward by $20, and the price paid by buyers will decrease by less than $20.
• B) demand curve will shift upward by $20, and the price paid by buyers will decrease by $20.
• C) supply curve will shift downward by $20, and the effective price received by sellers will increase by less than $20.
• D) supply curve will shift downward by $20, and the effective price received by sellers will increase by $20.

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Definitions:

Equipment Undervalued

A situation where the recorded book value of equipment on the financial statements is less than its current market value.

Partial Equity Method

An accounting approach used for investments where the investor has significant influence but not full control, recognizing income based on the proportionate share of the investee's earnings.

Investment

Allocating resources, usually money, with the expectation of generating an income or profit.

Equipment Undervalued

Situations in which equipment's book value on financial statements is less than its current market value or replacement cost.