The Graph Shown Demonstrates a Tax on Sellers

question 41

Multiple Choice

The graph shown demonstrates a tax on sellers. Before the tax was imposed, the sellers produced ________ units and received __________ for each one sold.

• A) 15; $16
• B) 31; $9
• C) 31; $19
• D) 15; $6

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Definitions:

Contribution Margin Ratio

The ratio that represents what percentage of sales contributes to the covering of fixed costs, calculated by subtracting variable costs from sales revenue and dividing the result by sales revenue.

Operating Income

Earnings from a company's core business operations, excluding revenue and expenses from non-operating activities like investments.

Variable Costs

Costs that vary depending on a company’s level of activity.

Break-even Sales

The amount of revenue from sales needed to cover a company's fixed and variable costs, resulting in zero net income.