Suppose a Tax of $5 Per Unit Is Imposed on a Good

question 137

Multiple Choice

Suppose a tax of $5 per unit is imposed on a good, and the tax causes the equilibrium quantity of the good to decrease from 200 units to 100 units. The tax decreases consumer surplus by $450 and decreases producer surplus by $300. The deadweight loss from the tax is

• A)$250.
• B)$500.
• C)$750.
• D)$1,000.

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Definitions:

Accrued Interest

Represents the interest that has accumulated over a period of time but has not yet been paid.

Bond Interest Expense

The cost incurred by an issuer of bonds for the interest payments made to bondholders.

Interest Payment

The amount paid by a borrower to a lender for the use of borrowed money, typically expressed as an annual percentage of the loan balance.

Stated Interest Rate

The interest rate explicitly mentioned in the contract of a debt instrument, not taking into account compounding or any additional fees.