Figure 8-17 the Vertical Distance Between Points a and B Represents the Represents

question 209

Multiple Choice

Figure 8-17
The vertical distance between points A and B represents the original tax.

-Refer to Figure 8-17.If the government changed the per-unit tax from $5.00 to $2.50,then the price paid by buyers would be $7.50,the price received by sellers would be $5,and the quantity sold in the market would be 1.5 units.Compared to the original tax rate,this lower tax rate would

• A) increase government revenue and increase the deadweight loss from the tax.
• B) increase government revenue and decrease the deadweight loss from the tax.
• C) decrease government revenue and increase the deadweight loss from the tax.
• D) decrease government revenue and decrease the deadweight loss from the tax.

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Definitions:

Marginal Costs

Marginal costs refer to the increase or decrease in the total cost of producing one more unit of a good or service.

Marginal Productivity

The additional output that results from employing one more unit of input, such as labor or capital, while keeping other inputs constant.

Fixed Costs

Costs that remain constant regardless of the amount of goods produced or sold, like wages or lease payments.

Marginal Costs

The extra expense incurred from making one more unit of a product or service.