The Imposition of a Tax on an Open-Access Resource Increases

question 120

Multiple Choice

The imposition of a tax on an open-access resource increases the marginal private cost of using the resource by _____

• A)zero.
• B)the amount of the tax.
• C)the marginal cost of the resource.
• D)the average private cost of using the resource.
• E)the average social cost of using the resource.

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Definitions:

Contribution Margin

The selling price per unit, minus the variable cost per unit, indicating the contribution towards covering fixed costs and profit.

Business Risk

The potential for loss or failure in a business operation due to factors like market conditions, financial instability, or operational challenges.

Financial Risk

The possibility of losing money on an investment or business venture, including market risk, credit risk, liquidity risk, and operational risk.

Variable Cost Ratio

This is a financial metric that represents the variable costs incurred as a percentage of sales, showing how much of each sales dollar is eaten by variable costs.