The government proposes a tax on flowers in order to boost its revenue. If the elasticity of demand is 1.3 and the elasticity of supply is 0.7:
a. Consumers will bear the majority of the burden of the tax
b. Producers will bear the majority of the burden of the tax.
c. Consumers and producers will bear equal shares of the burden of the tax.
d. It does not tell us enough to reveal whether consumers or producers will bear most of the burden of the tax.
b
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In the short run, a price increase in the goods and services market measured by the CPI will: a. increase the purchasing power of money
b. improve producer profits and, thereby, induce suppliers to expand output. c. increase resource prices, lower profits, and lead to a decline in output. d. reduce the natural rate of unemployment.
Why is free trade considered beneficial when consumers pay higher prices for products than they would have within a strictly domestic market?
a. Economists place more emphasis on producers and supply than they do on consumers and demand. b. Losses experienced within the domestic market are offset by gains within developing countries. c. The higher prices paid within the domestic market are temporary and usually decline in time. d. Negative effects experienced by consumers are offset by gains experienced by producers.
A temporary decrease in the price of oil would be considered a:
A. long-run supply shock. B. demand shock. C. short-run supply shock. D. The changing price of oil would not affect any of these.
Which of the following is an underlying assumption of the aggregate expenditure model?
a. Everyone shares equally in profits when income exceeds the cost of producing goods and services. b. The economy does better when income exceeds expenditure. c. Equilibrium is a hypothetical state that can never be reached. d. If there were no output in the economy, then there would be no income.