Zoe,Chloe,and Brody Each Like to Read Novels

question 320

Multiple Choice

Zoe,Chloe,and Brody each like to read novels.The current mystery thriller costs $10.Zoe values it at $15,Chloe at $13,and Brody at $11.Suppose that if the government taxes books at 50 cents each the selling price rises to $10.50.A consequence of the tax is that

• A) consumer surplus shrinks by $1.50 and tax revenues increase by $1.50, so there is no deadweight loss.
• B) consumer surplus shrinks by $9.00 and tax revenues increase by $1.50, so there is a deadweight loss of $7.50.
• C) consumer surplus shrinks by $7.50 and tax revenues increase by $7.50, so there is no deadweight loss.
• D) consumer surplus shrinks by $7.50 and tax revenues increase by $1.50, so there is a deadweight loss of $6.

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Definitions:

Sale-or-return

A commercial arrangement where goods are delivered to a buyer who has the right to return the goods if they are not sold, within a stipulated period.

Voidable Title

A legal condition referring to a situation where a title or ownership can be invalidated at the discretion of one party due to certain conditions, such as fraud.

Void

A term applied to a contract that is not valid because its object is illegal or it has some defect that is so serious that it is not a contract.

CIF

Cost, Insurance, and Freight, a term used in international trade that indicates the seller is responsible for covering these expenses until the goods reach the purchaser's specified port of destination.