If the government charged a tax on monopolists equal to, say, 75 percent of their economic profits, what would happen to the level of output the firm would produce? What about the price? Explain.
What will be an ideal response?
There would be no effect on the price or output level. This is an example of a change in fixed cost and has no impact on the marginal cost or marginal revenue. Therefore, the firm would have no incentive to change price or quantity. Note, however, that it would suffer a reduction in the level of profits.
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What is imperfect competition?
What will be an ideal response?
A binding price ceiling that could be set in the market in the graph shown would be:
A. $15.
B. $11.
C. $8.
D. $30.
Figure 11-2
Which graph in Figure 11-2 best reflects a Keynesian view of the impact of a $500-per-person tax cut?
a.
1
b.
2
c.
3
d.
4
In 2015 the gross domestic product of the United States was
A. $17.9 billion. B. $58,000. C. $17.9 trillion. D. $17.9 million.