Use the Following to Answer Questions

question 241

Multiple Choice

Use the following to answer questions:
Figure and Table: The Market for Taxi Rides
-(Figure and Table: The Market for Taxi Rides) Look at the figure and table The Market for Taxi Rides. If the government imposes an excise tax of $1 per ride (causing the supply curve to shift upward by that amount) , then the government will collect tax revenues of _____. However, the tax will cause a _____ deadweight loss to society.

• A) $9 million; $0.5 million
• B) $16 million; $1 million
• C) $45 million; $1 million
• D) $50 million; $0.5 million

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Definitions:

Normal Cash Flows

Cash flows that occur in a predictable pattern, where an initial outlay is followed by a series of income receipts.

Real Internal Rate of Return

The real internal rate of return is the annual rate of growth an investment is expected to generate, adjusted for inflation.

Multiple IRR Problem

A situation in capital budgeting where a project has more than one internal rate of return due to changing cash flow signs over the project's duration.

Normal Cash Flows

Regular inflows or outflows of cash associated with operational activities of a business within a specific period.