Mark,Kerry,Greg,and Carlos Each Like Chicago Cubs Baseball Games

question 21

Multiple Choice

Mark,Kerry,Greg,and Carlos each like Chicago Cubs 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 $5 each,the selling price will rise to $55.A consequence of the tax is that

• A) consumer surplus shrinks by $50 and tax revenues increase by $20, so there is a deadweight loss of $30.
• B) consumer surplus shrinks by $30 and tax revenues increase by $20, so there is a deadweight loss of $10.
• C) consumer surplus shrinks by $20 and tax revenues increase by $20, so there is no deadweight loss.
• D) consumer surplus shrinks by $50 and tax revenues increase by $20, so there is no deadweight loss.

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Definitions:

Conversion Cost

The sum of labor and overhead expenses required to convert raw materials into finished goods.

Direct Materials

Raw materials that can be directly traced to the production of a specific product and are a direct cost in the manufacturing process.

Finished Manufactured Product

A product that has completed the manufacturing process and is ready for sale to customers.

Factory Overhead

Factory overhead encompasses all indirect costs related to manufacturing, such as utilities, maintenance, and management salaries.