The Following Figure Shows the Demand Curve, D, and Supply

question 66

Multiple Choice

The following figure shows the demand curve, D, and supply curve, S, of ballpoint pens in Lithasia. The world price of pens is $2.

-Refer to the figure above.Which of the following methods is the best way to compensate the losers from opening Lithasia to international trade?

• A) The sellers in Lithasia could be taxed and the revenue could be used to compensate buyers.
• B) The buyers in Lithasia could be taxed and the revenue could be used to compensate sellers.
• C) Both buyers and sellers could be taxed and the revenue could be retained by the government.
• D) The sellers in Lithasia could sell the pens at a price above the equilibrium price in the domestic market.

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Definitions:

Accounts Receivable Turnover

A financial metric indicating how efficiently a company collects on the credit it extends to customers by measuring the number of times average accounts receivable are collected during a period.

Net Credit Sales

Net credit sales is the total revenue generated from sales made on credit, after subtracting any returns or allowances.

Average Accounts Receivable

The average amount of money owed to a company by its customers for goods or services sold on credit over a specific period of time.

Earnings per Share

A financial metric that indicates how much profit a company makes for each share of its stock, calculated as net income divided by the number of outstanding shares.