Figure 18-2 Figure 18-2 Shows a Demand Curve and Two Sets of Curve

question 129

Multiple Choice

Figure 18-2

Figure 18-2 shows a demand curve and two sets of supply curves, one set more elastic than the other.
-Refer to Figure 18-2.If the government imposes an excise tax of $1.00 on every unit sold, the government's revenue from the tax is represented by the area

• A)(PₐPc × Qₐ)if the supply curve is S₀ and (PbPc × Qb)if the supply curve is S₁.
• B)(PₐPd × Qₐ)if the supply curve is S₀ and (PbPₑ × Qb)if the supply curve is S₁.
• C)(PₐPₑ × Qₐ)under either supply curve.
• D)(PbPₑ × Qb)under either supply curve.

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Definitions:

Compounded Annually

The process of earning interest on an investment where the accrued interest is added to the principal sum once per year.

Nominal Rate

The nominal rate is the interest rate stated on a loan or investment agreement, not accounting for inflation or other factors that affect the real rate of return.

Compound Annual Rate

The rate at which an investment grows annually when interest is reinvested to earn additional interest.

Nominal Rate

The interest rate before adjustments for inflation or other factors, often referred to as the stated or face interest rate.