If the absolute value of the tax elasticity of supply is 0.8, a tax decrease of 10 percent will
A. Decrease output by 12.5 percent and increase tax revenues.
B. Increase output by 12.5 percent and increase tax revenues.
C. Increase output by 8 percent and decrease tax revenues.
D. Decrease output by 8 percent and increase tax revenues.
Answer: C
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A restaurant sells a large soft drink at a fixed price of $1.79. A term used by economists to describe the money received from the sale of an additional large soft drink is
A) pure profit. B) marginal revenue. C) gross earnings. D) net benefit.
If social returns to the production of a good are greater than private returns, then we can conclude that relative to the social optimum, the good will be
A) over produced and under priced. B) under produced and over priced. C) over produced and over priced. D) under produced and under priced. E) None of the above.
Suppose that a firm's long-run average total costs of producing custom wooden picnic tables is $300 when it produces 10,000 tables and $325 when it produces 11,000 tables. For this range of output, the firm is experiencing
a. economies of scale. b. constant returns to scale. c. diseconomies of scale. d. specialization.
Poor nations typically have a competitive advantage in agricultural goods because of
A. Plenty of land. B. Low labor costs. C. High productivity. D. Entrepreneurial incentives.