Athos, Porthos,and Aramis each like to take fencing lessons. The price of a fencing lesson is $11 . Athos values a lesson at $16, Porthos at $14, and Aramis at $12 . Suppose that if the government taxes fencing lessons at $2 each, the price will rise to $13 . A consequence of the tax is that consumer surplus shrinks by
a. $4 and tax revenues increase by $6, so there is a deadweight loss of $2.
b. $6 and tax revenues increase by $6, so there is no deadweight loss.
c. $5 and tax revenues increase by $6, so there is no deadweight loss.
d. $5 and tax revenues increase by $4, so there is a deadweight loss of $1.
d
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An inferior good exhibits
A) a negative income elasticity. B) a downward sloping Engel curve. C) a decline in the quantity demanded as income rises. D) All of the above.
Suppose sharply higher coffee prices lead to an increase in demand for tea. As tea prices increase, tea producers experience short-run economic profits. If the tea industry is a price-taker industry and if sufficient time is allowed for the market to adjust fully to the increase in demand for tea, one would expect the tea industry's output to
a. increase, and economic profits to increase as well. b. increase, and economic profits to disappear. c. decline, and economic profits to increase. d. decline, and economic profits to disappear.
The price of a coupon bond is determined by taking the present value of:
A. all of the bond's payments. B. the coupon payments and adding this to the face value. C. the bond's final payment and subtracting the coupon payments. D. the bond's final payment.
You are thinking about traveling to visit friends in Portland. You can fly or take the bus. A ROUND-TRIP plane ticket costs $300, and it takes three hours to get from your house to your friend's house if you fly. A ROUND-TRIP bus ticket costs $150 and it takes 10 hours to get door-to-door using the bus.What is the minimum value of your time necessary to induce you to buy the plane ticket instead of taking the bus?
What will be an ideal response?