The Current Price of Compact Discs, Which Are Traded in Perfectly

question 23

Multiple Choice

The current price of compact discs, which are traded in perfectly competitive markets, is $10.A $1 per unit tax is levied on the discs.Annual record sales decline from five million to four million as a result of the tax.Assuming that the income effect of the tax-induced price change is negligible, the excess burden of the tax will be:

• A)$500,000 per year.
• B)$1 million per year.
• C)$2 million per year.
• D)$2.5 million per year.

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Definitions:

Thrusting

A geological process where one part of the Earth's crust is pushed up over another at a low angle, often associated with mountain building.

Tectonic Terrane

A fragment of crustal material formed on, or broken off from one tectonic plate and accreted or sutured to crust lying on another plate.

Continental Crust

The thick part of the Earth's crust that forms the continents, characterized by its buoyancy and primarily granitic composition.

Passive Margin

A type of continental margin that is not an active plate boundary, characterized by little volcanic and earthquake activity.