Assume That the Demand for Diamonds Is More Elastic Than

question 134

Multiple Choice

Assume that the demand for diamonds is more elastic than the demand for gasoline.What happens to the consumer surplus if the same percentage tax is levied on both products

• A)The loss of consumer surplus is relatively small for diamonds.
• B)The loss of consumer surplus is relatively large for diamonds.
• C)The gain of consumer surplus is relatively small for diamonds.
• D)The gain of consumer surplus is relatively large for diamonds.

Analyze the impact of stock splits and stock dividends on company's equity and per-share values.

Understand the concept of residual dividend policy and its application in corporate finance.

Evaluate the effects of stock repurchases on earnings per share and market price of stock.

Interpret the relationship between market value, book value, and their impact on financial decisions.

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Definitions:

Consolidated Amount

The total sum resulting from the combination of various items, expenses, revenues, or financial statements.

Direct Approach

A method of presentation in cash flow statements where actual cash flow information from operating activities is presented directly.

Inventory

Materials and products that a business holds for the ultimate purpose of resale.

Investment Account

An account held at a financial institution or brokerage which is used for the buying of investments such as stocks, bonds, and mutual funds.