Figure 18-2 -Figure 18-2 Shows the Widget Market Before and After an and After

question 161

Multiple Choice

Figure 18-2
-Figure 18-2 shows the widget market before and after an excise tax is imposed.After the tax is imposed, the amount that a firm keeps for itself from the sale of each widget is ____.

• A)$95
• B)$100
• C)$120
• D)$125

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Definitions:

Margin Of Safety

The difference between actual or projected sales and the break-even point, measuring operational risk and efficiency.

Fixed Costs

Costs that do not change with the level of production or sales activities, such as rent, salaries, and insurance.

Contribution Margin Ratio

The percentage of each sales dollar that contributes to covering fixed costs and generating profit.

Break-Even Point

The sales level at which total revenues equal total costs, resulting in neither profit nor loss.