Mark,Kerry,Greg,and Carlos Each Like Boston Red Sox Baseball Games

question 316

Multiple Choice

Mark,Kerry,Greg,and Carlos each like Boston Red Sox baseball games.The single-game ticket price for an infield box seat is $50.Mark values a ticket at $70,Kerry at $65,Greg at $60,and Carlos at $55.Suppose that if the government taxes tickets at $10 each the selling price rises to $60.A consequence of the tax is that

• A) consumer surplus shrinks by $50 and tax revenues increase by $30, so there is a deadweight loss of $20.
• B) consumer surplus shrinks by $35 and tax revenues increase by $30, so there is a deadweight loss of $5.
• C) consumer surplus shrinks by $20 and tax revenues increase by $20, so there is no deadweight loss.
• D) consumer surplus shrinks by $15 and tax revenues increase by $20, so there is no deadweight loss.

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Definitions:

Drawing Account

An account used to record the amounts withdrawn by an owner from the business for personal use.

Net Income

The total profit of a company after all expenses and taxes have been subtracted from total revenue.

Common Shares

Equity ownership units in a corporation, entitling holders to voting rights and dividends.

Share Capital

Share capital refers to the funds raised by a company through the issuance of shares, which represent ownership interests in the company.