Who are the only ones not affected by a Pigouvian tax when a negative externality exists in a market?
A. Consumers
B. Those affected by the externality
C. Producers
D. All of these groups are affected when it becomes internalized.
Answer: D
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A movie monopolist sells to students and adults. The demand function for students is QdS = 600 - 100P and the demand function for adults is QdA = 1,200 - 100P. The marginal cost is $2 per ticket. What is the difference in the monopolist's profit when it is able to price discriminate and when it cannot?
A. $2,500 C. $0 D. $50
If demand is elastic, a price reduction will lead to an increase in total revenue.
Answer the following statement true (T) or false (F)
Historically, the largest U.S. federal budget deficits as a percentage of GDP in the 20th century occurred during
A) the Great Depression. B) the Vietnam war. C) World War I and World War II. D) 1970-1997. E) 1998-1999.
Gains from trade will be possible as long as
A) people have different endowments. B) people place different values on some goods. C) marginal rates of substitution are equal across individuals. D) excess supply equals excess demand.