In the Absence of Taxes,Ashley Would Prefer to Purchase a Large

question 323

Multiple Choice

In the absence of taxes,Ashley would prefer to purchase a large sport utility vehicle (SUV) .The government has recently decided to place a $10,000 nuisance tax on SUVs.If Ashley decides to purchase a small economy car as a result of the tax,which of the following statements is correct?

• A) Other people who choose to purchase SUVs will incur the cost of the deadweight loss of the tax.
• B) There are no deadweight losses as long as some people still choose to purchase SUVs.
• C) In order to determine the magnitude of the deadweight loss, we must add the revenues from the tax to the loss in Ashley's consumer surplus.
• D) Ashley is worse off, and her loss of welfare is part of the deadweight loss of the tax.

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Definitions:

Activity-Based Costing

An accounting method that assigns costs to products or services based on the activities they require and the resources consumed by these activities.

Direct Labor-Hours

The total hours worked by employees directly involved in the manufacturing process, directly affecting the production of goods.

Direct Materials Cost

The cost of raw materials that can be directly traced to the production of a specific product.

Activity-Based Costing

A costing method that assigns overhead and indirect costs to specific activities related to production, providing more accurate product costing.