When a Tax Is Imposed, the Surplus That Is Lost

question 104

Multiple Choice

When a tax is imposed, the surplus that is lost to buyers and sellers but converted into tax revenue is:

• A)considered a cost of taxation.
• B)part of deadweight loss.
• C)the sole source of deadweight loss.
• D)not part of deadweight loss.

---

Definitions:

Accounting Rate of Return

A financial ratio that measures the return on investment from a project based on its net income.

Time Value of Money

The concept that money available today is worth more than the same amount in the future due to its earning capacity.

Net Present Value

The variance between the current worth of incoming cash and the current worth of outgoing cash throughout a specific time frame.

Cost of Capital

The rate of return a company must earn on its investment projects to maintain its market value and attract funds.