Scenario 12-1 Ken Places a $20 Value on a Cigar, and Mark

question 200

Multiple Choice

Scenario 12-1
Ken places a $20 value on a cigar, and Mark places a $17 value on it. The equilibrium price for this brand of cigar is $15.
-Refer to Scenario 12-1. Suppose the government levies a tax of $1 on each cigar, and the equilibrium price of a cigar increases to $16. How much tax revenue is collected?

• A)$0
• B)$1
• C)$2
• D)$4

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Definitions:

Raw Materials Account

An accounting record that tracks the cost of raw materials purchased by a company intended for use in production.

November

The eleventh month of the year in the Gregorian calendar, often associated with fall in the northern hemisphere and spring in the southern hemisphere.

Raw Materials

The basic, unprocessed inputs required for the production process in manufacturing goods.

Direct Labor-Hours

A measure of the amount of time spent by workers directly involved in the manufacturing process, used in calculating labor costs and efficiency.