(Advanced Analysis)The Equations for the Demand and Supply Curves for a Particular

question 16

Multiple Choice

(Advanced analysis) The equations for the demand and supply curves for a particular product are P = 10 − 0.4 Q and P = 2 + 0.4 Q, where P is price and Q is quantity expressed in units of 100. After an excise tax is imposed on the product, the supply equation is P = 3 + 0.4 Q. The equilibrium quantity after the excise tax is imposed is

• A)875 units.
• B)800 units.
• C)1,200 units.
• D)1,000 units.

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Definitions:

Hurdle Rate

The minimum rate of return on a project or investment required by a manager or investor.

Payback Method

An investment appraisal technique that calculates the amount of time required for an investment to generate cash flows sufficient to recover its initial cost.

Cash Inflows

Money or equivalent value received by a business, often from operations, investments, or financing activities.

Discounting

The process of determining the present value of a future amount of money or stream of income.