Adam,Barb,and Carli Each Like to Read Novels

question 172

Multiple Choice

Adam,Barb,and Carli each like to read novels.The current bestseller costs $10.Adam values it at $15,Barb at $13,and Carli at $11.Suppose that if the government taxes books at $2 each,the selling price will rise to $12.A consequence of the tax is that

• A) consumer surplus shrinks by $4 and tax revenues increase by $6,so there is a deadweight loss of $2.
• B) consumer surplus shrinks by $6 and tax revenues increase by $6,so there is no deadweight loss.
• C) consumer surplus shrinks by $5 and tax revenues increase by $6,so there is no deadweight loss.
• D) consumer surplus shrinks by $5 and tax revenues increase by $4,so there is a deadweight loss of $1.

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Definitions:

Operating Cash Receipts

Money received by a company from its operational activities, such as sales of goods or services.

Accumulated Depreciation

The total amount of depreciation expense recorded for an asset, reducing its book value over time.

Equipment Costing

The process of tracking and analyzing the costs associated with the purchase and maintenance of equipment.

Cash Equivalent

Short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.