Athos, Porthos, and Aramis Each Like to Take Fencing Lessons

question 175

Multiple Choice

Athos, Porthos, and Aramis each like to take fencing lessons. The price of a fencing lesson is $10. Athos values a lesson at $17, Porthos at $15, and Aramis at $12. Suppose that if the government taxes fencing lessons at $3 each, the price will rise to $13. A consequence of the tax is that consumer surplus shrinks by

• A)$3 and tax revenues increase by $9, so there is a deadweight loss of $3.
• B)$6 and tax revenues increase by $9, so there is no deadweight loss.
• C)$9 and tax revenues increase by $6, so there is no deadweight loss.
• D)$9 and tax revenues increase by $6, so there is a deadweight loss of $3.

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Definitions:

FIFO

"First In, First Out," an inventory valuation method where goods purchased or produced first are sold or used first.

Ending Inventory

The total value of goods remaining unsold at the end of an accounting period, calculated as a part of the cost of goods sold.

Periodic Inventory System

An accounting method where inventory levels and cost of goods sold are determined at set intervals, typically at the end of an accounting period.

FIFO

First-In, First-Out, a method used in inventory management where the first items placed in inventory are the first to be used or sold.