Suppose that Kara values a hot fudge sundae at $6 and Stacia values one at $5 . The pretax price of a hot fudge sundae is $3 . The government imposes a $1 tax on hot fudge sundaes, which raises the price to $4 . What is the deadweight loss from the tax?
Prior to the tax, consumer surplus was $5 -- $3 for Kara ($6-$3) and $2 for Stacia ($5-$3). After the tax, consumer surplus shrinks to $3 -- $2 for Kara ($6-$4) and $1 for Stacia ($5-$4), but tax revenue increases by $2 ($1 from Kara and $1 from Stacia). Deadweight loss is $0 because $5-$3-$2=$0 . Said another way, the loss in consumer surplus equals the tax revenue raised.
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The type of policy that involves interest rates and the availability of loanable funds is known as:
A) fiscal policy. B) monetary policy. C) strategic financial policy. D) federal policy.
The balance of trade is measured by which of the following expressions?
a. The value of exported goods and services minus the value of imported goods and services b. The value of income receipts on investments minus income payments on investments c. The value of goods exports minus the value of goods imports d. The value of government spending minus the value of all taxes received e. The balance on capital account plus the balance on current account