Fact Pattern 41-3​ DIY Fasteners Company Decides to Consolidate Its Operations with Evergrip

question 56

Multiple Choice

Fact Pattern 41-3​
DIY Fasteners Company decides to consolidate its operations with Evergrip Studs, Inc., to form Fit-Rite Bolts & Screws Inc.
-Refer to Fact Pattern 41-3. Evergrip owed money to Guaranty Bank and other creditors. After the consolidation, Fit-Rite must pay​

• A) ​all of Evergrip's debts.
• B) ​half of Evergrip's debts.
• C) ​none of Evergrip's debts.
• D) ​only debts that Evergrip incurred after consolidation was proposed.

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Definitions:

Tax Per Unit

A tax that is levied on a product based on the amount of the product sold, not on its value.

Consumer Surplus

The incongruity between what consumers are willing to expend on a good or service and what they truly expend.

Producer Surplus

The difference between what producers are willing to accept for a good or service and the actual amount they receive.

Opportunity Cost

Opportunity cost represents the value of the best alternative that must be forgone as a result of choosing another option.