Assume the supply curve for diapers is a typical, upward-sloping straight line, and the demand curve for diapers is a typical, downward-sloping straight line. Suppose the equilibrium quantity in the market for diapers is 1,000 per month when there is no tax. Then a tax of $0.50 per diaper 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. After the tax is imposed, the equilibrium quantity of diapers is 900 per month.
b. The demand for diapers is more elastic than the supply of diapers.
c. The deadweight loss of the tax is $12.50.
d. The tax causes a decrease in consumer surplus of $380.
c
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The above figure shows the market for pizza. The market is in equilibrium when new pizza firms enter the market. What point represents the most likely new price and quantity?
A) A B) B C) C D) D E) E
If a monopolistically competitive firm's demand curve is shifting left, it will stop shifting when:
A. firms are positive but not large economic profit. B. the firm is earning negative economic profit. C. the firm is earning zero economic profit. D. price falls to marginal cost.
Productivity growth tends to affect all industries to the same degree.
Answer the following statement true (T) or false (F)
Suppose that the total expenditures for a typical household in 2010 equaled $2,500 per month, while the cost of purchasing exactly the same items in 2015 was $3,000. If 2010 is the base year, the CPI for 2010 equals:
A. 1.00 B. 1.20 C. 1.25 D. 0.83