Suppose that a town council plans to raise the tax charged on each pack of cigarettes sold by 20 percent in order to raise its tax revenues. An economist points out to the council that the tax increase could possibly lead to a decrease in packs sold of more than 20 percent, and thus ultimately reduce the city's tax revenues. Which of the key concepts in economics is best represented by the economist's observation?
a. looking for unintended effects
b. efficiency
c. opportunity cost
d. decisions made at the margin
Ans: a. looking for unintended effects
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During the Great Depression, cyclical unemployment increased as the recession continued. This increase in cyclical unemployment
A) could have increased or decreased the natural rate of unemployment. B) decreased the natural rate of unemployment. C) increased the natural rate of unemployment. D) had no effect on the natural rate of unemployment.
Refer to Scenario 1. The production function illustrated in the table:
A) incurs diminishing marginal returns beyond the first unit of labor. B) incurs diminishing marginal returns beyond the second unit of labor. C) incurs diminishing marginal returns beyond the third unit of labor. D) does not incur diminishing marginal returns because marginal product is positive for each unit of labor employed.
A government-sponsored good is often
A) produced by the government. B) subsidized. C) taxed. D) advertised.
A bank with a leverage ratio of 6.5 to 1 has
A) $6.50 in assets for every $1 in liabilities. B) $6.50 in assets for every $1 in capital. C) $1 in assets for every $6.50 in capital. D) $1 in assets for every $6.50 in liabilities.