The above figure shows supply and demand curves for milk. If the government passes a $2 per gallon specific tax, the tax revenue is
A) $2 ? Q1.
B) $2 ? Q2.
C) $2 ? (Q2 - Q1).
D) $2.
A
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Graphically, the presence of an external cost that is ignored by producers can be shown as
A) a market supply curve to the left of the market supply curve for where the producers have to pay for the external cost. B) a market supply curve to the right of the market supply curve for which the producers have to pay for the external cost. C) a market supply curve the same as the market supply curve for which the producers have to pay for the external cost. D) the absence of a market supply curve.
In practice, regulatory boards try to set the price of a natural monopoly so that price covers a normal return on capital investment. As a result:
A. there is an incentive to use more equipment. B. the price of equipment should decrease. C. there is an incentive to use less equipment. D. the incentive to use equipment stays the same.
A situation in which the price charged is greater than society's opportunity cost would lead to
A. marginal cost pricing. B. too little being produced. C. an efficient amount being produced. D. too much being produced.
Assume that the loans made by the Paris First National Bank contracted from $16 million to $12 million. If the legal reserve requirement was increased from 20 percent to 40 percent, how much would the money supply shrink?
a. $5 million b. $10 million c. $15 million d. $20 million e. $24 million