The Inverse Demand Function for Video Games Is P =

question 18

Multiple Choice

The inverse demand function for video games is p = 240 - 2q and the inverse supply function is p = 3 + q.When the government imposes a $6 tax on each video game purchased,

• A)consumer's surplus falls by more than producer's surplus.
• B)producer's surplus falls by more than consumer's surplus.
• C)consumer's surplus and producer's surplus fall by the same amount.
• D)consumer's surplus falls and producer's surplus increases.
• E)producer's surplus falls and consumer's surplus increases.

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Definitions:

Operating Leverage

A measure of how sensitive a company's operating income is to a change in its sales volume, indicating the degree to which fixed costs are used in production.

Profits

The financial gain obtained when revenues generated from business activities exceed the expenses, costs, and taxes needed to sustain them.

Demand-Side Economics

An economic theory focused on increasing demand for goods and services as a pathway to economic growth and full employment.

Fiscal Policy

The use of government spending and taxation to stabilize the economy.