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:

Sample Proportion

The fraction or percentage of the sample that represents a particular trait or characteristic of interest.

Null Hypothesis

A hypothesis that assumes no significant difference or effect exists between specified populations or variables.

Population Proportion

The fraction or percentage of a population that shares a particular characteristic or attribute.

Sample Proportion

The proportion or percentage of the sample that has a particular characteristic, often used to estimate the true population proportion.