Table 12-4 -Refer to Table 12-4.Suppose That the Government Imposes a $2

question 191

Multiple Choice

Table 12-4

-Refer to Table 12-4.Suppose that the government imposes a $2 tax on delights,causing the price to increase from $4.00 to $6.00.Deadweight loss arises because

• A) Lucy will pay more tax as a percentage of her value of delights than Ricky.
• B) Ricky must pay the $2.00 tax from his consumer surplus.
• C) Ricky will have to pay a higher price for delights.
• D) Lucy will leave the market.

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Definitions:

Annual Installments

Payments made yearly towards the settlement of a debt or purchase price over a fixed period.

Interest

Interest is the charge for borrowing money or the compensation paid to depositors, calculated as a percentage of the principal amount.

Compounded Monthly

A method of calculating interest in which the accrued interest is added to the principal at the end of each month, leading to interest on interest in subsequent months.

Mortgage

A loan provided by a lender or a bank that enables an individual to purchase a home or real estate, using the property itself as collateral.