Figure 8-6 -Refer to Figure 8-6.As a Result of the Tax

question 142

Multiple Choice

Figure 8-6

-Refer to Figure 8-6.As a result of the tax,

• A)consumer surplus decreases by $65; producer surplus decreases by $85; tax revenue of $120 is generated; and the deadweight loss of the tax is $30.
• B)consumer surplus decreases by $75; producer surplus decreases by $75; tax revenue of $120 is generated; and the deadweight loss of the tax is $30.
• C)consumer surplus decreases by $80; producer surplus decreases by $80; tax revenue of $120 is generated; and the deadweight loss of the tax is $40.
• D)consumer surplus decreases by $120; producer surplus decreases by $120; tax revenue of $200 is generated; and the deadweight loss of the tax is $40.

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Definitions:

Capital Asset Pricing Model

A model that describes the relationship between systematic risk and expected return for assets, particularly stocks. It is widely used for pricing risky securities.

Market Rate

The prevailing interest rate available in the marketplace on investments, loans, and deposits.

Expected Rate

Expected Rate often refers to the return that investors anticipate earning on an investment over a certain period.

Risk-Free Rate

The theoretical return on investment with no risk of financial loss, often represented by the yield on government bonds.