Mandla Values a Pair of Blue Jeans at R400

question 47

Multiple Choice

Mandla values a pair of blue jeans at R400. If the price is R350, Mandla buys the jeans and generates consumer surplus of R50. Suppose a tax is placed on blue jeans that causes the price of blue jeans to rise to R450. Now Mandla chooses not to buy a pair of jeans. This example has demonstrated

• A) the deadweight loss from a tax.
• B) the ability-to-pay principle.
• C) the benefits principle.
• D) horizontal equity.
• E) the administrative burden of a tax.

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Definitions:

Times Interest Earned

A financial ratio that measures a company's ability to meet its debt obligations by comparing its income before interest and taxes (EBIT) to its interest expenses.

Balance Sheet

A financial statement that outlines a company's assets, liabilities, and shareholders' equity at a specific point in time, providing a basis for computing rates of return and evaluating its capital structure.

Income Statement

An income statement is a financial statement that shows a company's revenues and expenses over a specific period, culminating in net profit or loss.

Equity Multiplier

A financial leverage ratio that measures the portion of a company's assets that are financed by stockholders' equity.