Refer to the graph shown. Assume that the market is initially in equilibrium at a price of $6 and a quantity of 40 units. If the government imposes a $2 per-unit tax on this product, the deadweight loss from the tax will be:
A. 80.
B. 70.
C. 60.
D. 10.
Answer: D
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A key assumption of most economic analysis is that people act rationally, meaning they respond to incentives
Indicate whether the statement is true or false
Suppose your accountant told you that the $50,000 you made last year was your normal profit. When you asked him what your accounting profit was he replied that it was precisely the same as your normal profit. You wouldn't have to ask what your economic profit was because you know it must be
a. 0 b. $50,000 c. $100,000 d. $50,000 loss e. $100,000 loss
In this graph, at point e1, output level is ______.
a. above the potential
b. below the potential
c. at the potential
d. not shown
The marginal rate of substitution is
A. the slope of the budget line at all points. B. found by adding additional units. C. the change in the quantity of one good that just offsets a unit change in another good, keeping utility constant. D. equal to unit changes in the quantities of both goods so that utility rises.