The government raises gasoline taxes as part of the price of gasoline and receives more tax revenues. However, after five years, the government discovers that revenues from the gasoline tax have declined
This situation would be most likely to occur if A) the long-run elasticity of supply was much greater than the long-run elasticity of demand.
B) the demand for gasoline was inelastic in the short run, but elastic in the long run.
C) the long-run elasticity of demand was greater than the long-run elasticity of supply.
D) the demand for gasoline was perfectly inelastic in both the short run and the long run.
B
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To separate the income and substitute effects, the imaginary budget line should be
A) tangent to the new indifference curve and parallel to the new budget line. B) tangent to the new indifference curve and parallel to the old budget line. C) tangent to the old indifference curve and parallel to the new budget line. D) tangent to the old indifference curve and parallel to the old budget line.
Traffic lights would be considered:
A. a common resource. B. a private good. C. a public good. D. an artificially scarce good.
If a good is nonexcludable,
a. the providing it is Pareto optimal b. people have an incentive to become free riders on that good c. then it is probably also nonrival d. then it is a pure public good e. then it is a pure private good
GDP is an incomplete measure of social welfare because
a. GDP includes the services of prison guards, so an increase in GDP could mean an increase in crime b. GDP does not include the value of volunteer activities, which may improve social welfare c. an increase in output may increase pollution and traffic congestion d. all of the above