Figure 8-7 the Vertical Distance Between Points a and B Represents a Represents

question 488

Multiple Choice

Figure 8-7
The vertical distance between points A and B represents a tax in the market.
-Refer to Figure 8-7. Suppose a 20th unit of the good were sold by a seller to a buyer. Which of the following statements is correct?

• A) For the 20th unit, the difference between the buyer's value and the seller's cost is less than the tax per unit.
• B) For the 20th unit, the difference between the buyer's value and the seller's cost is greater than the tax per unit.
• C) For the 20th unit, the difference between the buyer's value and the seller's cost is equal to the tax per unit.
• D) It makes sense for the buyer to buy and for the seller to sell the 20th unit, with or without the tax in place.

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Definitions:

Privity of Contract

The principle that a contract directly affects and grants enforceable rights only to the parties involved in the contract agreement.

Promissory Estoppel

A legal principle that prevents a party from going back on a promise, even if it was made without formal consideration, when someone else has reasonably relied on that promise.

Statute of Frauds

A legal principle requiring certain types of contracts to be in writing and signed by the parties involved to be legally enforceable.

Statutory Novation

The replacement of an obligation to perform under a contract with a new obligation or party, as recognized by statute.