Suppose the demand curve for a good is downward sloping and the supply curve is upward sloping. At the market equilibrium, if demand is more elastic than supply in absolute value, a $1 specific tax will
A) raise the price to consumers by 50 cents.
B) raise the price to consumers by less than 50 cents.
C) raise the price to consumers by more than 50 cents.
D) raise the price to consumers by $1.
B
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Suppose the supply of coal is perfectly inelastic, and the price elasticity of demand for coal is -0.4. If the government imposes a binding price ceiling for coal at a price that is 20 percent below the market equilibrium price, what is the impact of this policy on the market quantity?
A. Excess demand equals 16 percent of the market equilibrium quantity. B. Excess demand equals 80 percent of the market equilibrium quantity. C. The policy does not affect the market quantity. D. Excess demand equals 8 percent of the market equilibrium quantity.
Price elasticity of demand is calculated as the ratio of the change in quantity demanded to the change in price.
Answer the following statement true (T) or false (F)
During periods of slow growth, the Federal Reserve will likely
A. decrease the money supply to decrease interest rates. B. increase the money supply to decrease interest rates. C. decrease the money supply to increase interest rates. D. increase the money supply to increase interest rates.
A sales tax is divided so that the
A) buyers pay the full amount if demand is perfectly elastic. B) buyers pay the full amount if supply is perfectly inelastic. C) sellers pay the full amount if supply is perfectly elastic. D) sellers pay the full amount if demand is perfectly elastic.