Figure 4-10 -Refer to Figure 4-10.Suppose the Market Is Initially in Equilibrium

question 72

Multiple Choice

Figure 4-10

-Refer to Figure 4-10.Suppose the market is initially in equilibrium at price P₀ and then the government imposes a tax on every unit sold.Which of the following statements best describes the impact of the tax?

• A) The consumer will bear a smaller share of the tax burden if the demand curve is D₀.
• B) The consumer's share of the tax burden is the same whether the demand curve is D₀ or D₁.
• C) The consumer will bear a smaller share of the tax burden if the demand curve is D₁.
• D) The consumer will bear the entire burden of the tax if the demand curve is D₁ and the producer will bear the entire burden of the tax if the demand curve is D₀.

---

Definitions:

Yield To Maturity

A measure of the annualized return anticipated on a bond if the bond is held until its maturity date, accounting for current market price, par value, coupon interest rate, and time to maturity.

Par Value

A nominal value assigned to a security or company stock, serving as the minimum price at which the security can initially be sold.

Coupon Payment

Dollar amount of interest paid to each bondholder on the interest payment dates.

Maturity

The date on which the principal amount of a financial instrument, such as a bond or loan, is due to be paid in full.