Zoe,Chloe,and Brody Each Like to Read Novels

question 43

Multiple Choice

Zoe,Chloe,and Brody each like to read novels.The current mystery thriller costs 10 dinars.Zoe values it at 15 dinars,Chloe at 13 dinars,and Brody at 11 dinars.Suppose that if the government taxes books at 0.50dinarseach,the selling price rises to 10.50 dinars.A consequence of the tax is that

• A)consumer surplus shrinks by 1.50 and tax revenues increase by 1.50,so there is no deadweight loss.
• B)consumer surplus shrinks by 9.00 and tax revenues increase by 1.50,so there is a deadweight loss of 7.50.
• C)consumer surplus shrinks by 7.50 and tax revenues increase by 7.50,so there is no deadweight loss.
• D)consumer surplus shrinks by 7.50 and tax revenues increase by 1.50,so there is a deadweight loss of 6.

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Definitions:

Preliminary Registration Statement

A document submitted by a company to securities authorities detailing a planned offering of securities, subject to change before it becomes final.

Securities And Exchange Commission (SEC)

A U.S. federal agency responsible for enforcing federal securities laws, regulating the securities industry, and ensuring that the nation's securities exchanges and markets operate fairly and honestly.

Initial Public Offering (IPO)

The first sale of stock by a private company to the public, transitioning it into a publicly traded company.

Firm-Commitment Underwriting

A type of underwriting where the underwriter buys the entire issue of securities from the issuer and sells them to investors at a profit.