Figure 8-7 the Vertical Distance Between Points a and B Represents a Represents

question 87

Multiple Choice

Figure 8-7
The vertical distance between points A and B represents a tax in the market.
-Refer to Figure 8-7.Which of the following statements is correct?

• A)The loss of producer surplus that is associated with some sellers dropping out of the market as a result of the tax is $60.
• B)The loss of consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is $120.
• C)The loss of consumer surplus caused by this tax exceeds the loss of producer surplus caused by this tax.
• D)This tax produces $320 in tax revenue for the government.

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Definitions:

Salvage Value

The anticipated market value of an asset upon completing its service life.

Matching Principle

An accounting principle that requires expenses to be matched with the revenues they helped to generate in the same period.

Amortization

The gradual reduction of a debt over a period of time or the spreading out of capital expenses related to intangible assets over their useful life.

Matching Principle

An accounting principle that dictates expenses should be recognized in the same period as the revenues they helped generate.