Suppose the state of Wyoming passes a law that increases the tax on cigarettes. As a result, smokers who live in Wyoming start purchasing their cigarettes in surrounding states. Which of the following principles does this best illustrate?
a. People respond to incentives.
b. Rational people think at the margin.
c. Trade can make everyone better off.
d. Markets are usually a good way to organize economic activity.
a
You might also like to view...
In order for the government to collect taxes, the government must first establish a(n)
A) ad valorem taxation. B) tax base. C) philosophy of taxation. D) justice system.
Assume the price of good X increases. As a result, your real income decreases and you decrease the quantity of good X purchased each month. This is an example of the:
a. income effect. b. consumer price effect. c. revenue effect. d. substitution effect. e. all of these.
Price change causes movement along supply curve, not shift in curve
a. true b. false
The kinked-demand curve model of oligopoly:
A. assumes a firm's rivals will ignore a price cut but match a price increase. B. embodies the possibility that changes in unit costs will have no effect on equilibrium price and output. C. assumes a firm's rivals will match any price change it may initiate. D. assumes a firm's rivals will ignore any price change it may initiate.