Assume the supply curve for cigars is a typical, upward-sloping straight line, and the demand curve for cigars is a typical, downward-sloping straight line. Suppose the equilibrium quantity in the market for cigars is 1,000 per month when there is no tax. Then a tax of $0.50 per cigar is imposed. The effective price paid by buyers increases from $1.50 to $1.90 and the effective price received by
sellers falls from $1.50 to $1.40 . The government's tax revenue amounts to $475 per month. Which of the following statements is correct?
a. The demand for cigars is less elastic than the supply of cigars.
b. The tax causes a decrease in consumer surplus of $390 and a decrease in producer surplus of $97.50.
c. The deadweight loss of the tax is $12.50.
d. All of the above are correct.
d
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Refer to Table 2.4. What can be observed about the given resources?
A) Land is fixed but fertilizer is variable. B) Land and fertilizer are both fixed. C) Land is variable but fertilizer is fixed. D) Land and fertilizer are both variable.
According to the article, ________ is expected to increase and add to China's ________ component of GDP
A) retail sales; consumption B) retail sales; investment C) rental income; investment D) rental income; exports
The terms of trade are
A) the terms negotiated in a trade agreement. B) exports plus imports divided by GDP. C) the value of the real exchange rate. D) the ratio of export prices to import prices.
Economic incentives are designed to make individual self-interest coincide with social interest. According to economists, which of the following methods of pollution control best uses economic incentives to reduce pollution?
A) rewarding environmental groups for monitoring the activities of private firms that produce products which generate pollution B) imposing quantitative limits on the amount of pollution and imposing a penalty for non-compliance with these limits C) requiring the installation of specific pollution control devices D) instituting a system of tradable emission allowances