A difficulty with using a uniform per-unit tax to address a negative externality is that
A. the tax will increase price.
B. the social cost of pollution might vary across geographic regions.
C. the social cost of pollution should not be assessed on the consumers, but should be assessed on the firms.
D. the tax will reduce output.
Answer: B
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Competition
A) cannot be eliminated unless scarcity is eliminated. B) causes people to hope others will fail. C) compels people to do only what is in the public interest. D) only exists in capitalist societies. E) only exists in societies with fiat currency.
Which statement is consistent with the economic way of thinking?
A) Politicians seek to advance their own interests. B) Politicians are not only concerned with money and material goods. C) Politicians do not necessarily pursue narrow or selfish goals. D) All of the above. E) None of the above.
If two identifiable markets differ with respect to their price elasticity of demand and resale is impossible, a firm with market power will
A) set a higher price in the market that is more price elastic. B) set a lower price in the market that is more price elastic. C) set price so as to equate the elasticity of demand across markets. D) set price equal to marginal cost in both markets.
A market has four individuals, each considering buying a grill for his backyard. Assume that grills come in only one size and model. Abe considers himself a grill-master, and finds a grill a necessity, so he is willing to pay $400 for a grill. Butch is a meat-lover, honing his grilling skills, and is willing to pay $350 for a grill. Collin just met the girl of his dreams, and she loves a good grilled steak, so in his effort to impress her he is willing to pay $320 for a grill. Daniel loves grilled shrimp and thinks it might be cheaper in the long run if he buys a grill instead of eating out every time he wants grilled shrimp, so he is willing to pay $200 for a grill.
Given the scenario described, if the market price of grills falls from $395 to $340, then we can say: A. Abe's consumer surplus increases from $5 to $60, and total consumer surplus increases from $5 to $70. B. Abe's consumer surplus decreases from $60 to $5, and total consumer surplus decreases from $70 to $5. C. Collin's consumer surplus increases from $0 to $20, and total consumer surplus increases from $5 to $70. D. Butch's consumer surplus decreases from $10 to $0, and total consumer surplus increases from $10 to $80.