Suppose a Tax of $5 Per Unit Is Imposed on a Good

question 137

Multiple Choice

Suppose a tax of $5 per unit is imposed on a good, and the tax causes the equilibrium quantity of the good to decrease from 200 units to 100 units. The tax decreases consumer surplus by $450 and decreases producer surplus by $300. The deadweight loss from the tax is

• A)$250.
• B)$500.
• C)$750.
• D)$1,000.

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Definitions:

Departmental Predetermined Rates

Specific predetermined overhead rates calculated for different departments within a company, to more accurately allocate costs.

Machine-Hours

A measure of production volume in terms of the total hours machines are operated in the manufacturing process.

Departmental Predetermined Rates

Rates used to allocate departmental overhead costs, established in advance based on expected costs and activity levels.

Machine-Hours

A measurement unit representing the operational time of a machine, typically used in manufacturing to allocate costs based on usage.