Suppose the Market Demand Function for Ice Cream Is

question 19

Multiple Choice

Suppose the market demand function for ice cream is and the market supply function for ice cream is ,both measured in millions of gallons of ice cream per year.Suppose the government imposes a $0.50 tax on each gallon of ice cream.The change in aggregate surplus due to the tax is

• A) $0.16
• B) $2.84
• C) $1.16
• D) $2.36

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Definitions:

Ledger

An accounting book or computer file used for recording and totaling economic transactions measured in terms of a monetary unit, by account.

Posting

The process of recording amounts as debits or credits in the accounts of a company's general ledger.

Debt Ratio

A ratio indicating a company's level of indebtedness by dividing its total liabilities by its total assets.

Financial Leverage

The use of borrowed funds to increase the potential return of an investment.