Suppose Jack Values an Ice Cream Sundae at $4

question 219

Multiple Choice

Suppose Jack values an ice cream sundae at $4.Dianne values an ice cream sundae at $6.The pre-tax price of an ice cream sundae is $2.The government imposes a "fat tax" of $3 on each ice cream sundae,and the price rises to $5.The deadweight loss from the tax is

• A) $1.
• B) $2.
• C) $3.
• D) $4.

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Definitions:

User Cost

The cost associated with the use of a product or service, including wear and tear, depreciation, and the opportunity cost of not using the asset for an alternative purpose.

Extraction Cost

The expenses associated with the removal of raw materials from their natural setting, including mining, drilling, and quarrying activities.

Interest Rates

The cost of borrowing money or the return on investment for savings, typically expressed as a percentage of the principal.

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Diamonds that are mined and sold by combatants in war zones in Africa as a way to provide the currency needed to finance their military activities.