Exhibit 19-2 ​

question 2

Multiple Choice

Exhibit 19-2
​

-Refer to Exhibit 19-2. The market for good X is initially in equilibrium at $5. The government then places a per-unit tax on good X, as shown by the shift of S₁ to S₂. As a result,

• A)consumers end up paying $6.25 per unit, and producers end up receiving $5.00 per unit, but keeping only $4.00 per unit.
• B)consumers end up paying $6.25 per unit, and producers end up receiving and keeping $4.00 per unit.
• C)consumers end up paying $5.00 per unit, and producers end up receiving and keeping $5.00 per unit.
• D)consumers end up paying $6.25 per unit, and producers end up receiving $6.25 per unit, but keeping only $4.00 per unit.
• E)none of the above

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Definitions:

Absorption Costing

An accounting method that includes all manufacturing costs — direct materials, direct labor, and both variable and fixed manufacturing overhead — in the cost of a product.

Premium Tomato Juice

A high-quality tomato juice that is often characterized by its superior taste and higher nutrient content compared to regular tomato juices.

Absorption Costing

An accounting method that includes all manufacturing costs – direct materials, direct labor, and both variable and fixed manufacturing overhead – in the cost of a product.

Variable Costing

An accounting method that includes only variable costs—costs that vary with production level—in the calculation of unit cost.