Use the Following to Answer Questions

question 63

Multiple Choice

Use the following to answer questions:
Figure: The Market for Hamburgers
-(Figure: The Market for Hamburgers) Look at the figure The Market for Hamburgers. If the market is originally in equilibrium and the government imposes an excise tax of $0.80 per unit of the good sold, the deadweight loss associated with the tax will be:

• A) $40.
• B) $240.
• C) $105.
• D) $90.

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Definitions:

Accrual-Basis Accounting

Accounting basis in which companies record transactions that change a company's financial statements in the periods in which the events occur.

Cash-Basis Accounting

Accounting basis in which companies record revenue when they receive cash and an expense when they pay out cash.

Revenue Recognition Principle

An accounting principle stating that revenue should be recorded when it is earned and realizable, regardless of when the cash is received.

Expense Recognition Principle

An accounting principle that states expenses should be recognized and recorded when they are incurred, regardless of the timing of cash payments.