When a Tax Is Imposed,the Surplus That Is Lost to Buyers

question 11

Multiple Choice

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

• A) transferred to others through public programs.
• B) lost and considered a cost of taxation.
• C) part of deadweight loss.
• D) All of these statements are true.

---

Definitions:

Call Option

A legally binding financial document that provides the acquirer the potential, albeit without the obligation, to invest in a range of assets including equities, debts, or raw materials at a price set in advance, and within an agreed period.

Exercising The Option

The act of buying or selling the underlying asset via the option contract.

Employee Stock Option (ESO)

An option granted to an employee by a company giving the employee the right to buy shares of stock in the company at a fixed price for a fixed time.

European Options

Financial derivatives that give the holder the right, but not the obligation, to buy or sell an underlying asset at a specified price on the expiration date, unlike American options which can be exercised at any time before expiry.