The Graph Shown Demonstrates a Tax on Sellers

question 132

Multiple Choice

The graph shown demonstrates a tax on sellers. Which of the following can be said about the effect of this tax?

• A) The tax increases producer surplus.
• B) Consumers prefer this tax over a tax levied on buyers.
• C) The deadweight loss would be larger if this tax had been imposed on buyers.
• D) The tax decreases consumer surplus.

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Definitions:

Derivative Securities

Financial instruments whose value is derived from the value of an underlying asset, such as futures, options, and swaps.

Consumer Durables

Goods that are not consumed with their use and can be used over a longer period, such as appliances, vehicles, and electronics.

Real Assets

Tangible, physical assets such as real estate, commodities, and natural resources, which have intrinsic value due to their substance and physical properties.

Common Stock

Represents ownership shares in a corporation, giving holders a claim on part of the company's profits and assets.