The City of Greenville needs to raise revenue. Alderman Black has proposed a $10 tax on red cars in the city, currently numbering 2,000 . Mayor White, who wants more than $20,000 in revenue, proposes taxing these cars at $100 each. Councilwoman
Bluestone goes even farther, suggesting a $1,000 per red car tax, arguing that her proposal will raise $2 million. If maximizing tax revenue is the only consideration, which proposal should pass? Why?
It is an economic fact that if you tax something you get less of it. Even at $10 per car, some people will decide not to drive red cars (by selling or painting their vehicles). Suppose 100 people do this. Alderman Black's proposal will then yield $19,000 . At $100 per red car, there will be a lot fewer red cars. But as long as more than 190 people elect to keep their cars red, the mayor's proposal will raise more revenue. A $1,000 tax would only require more than 19 red cars to generate more revenue than the $10 tax. However, at such a high fee, it is likely that no red cars will remain in Greenville.
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A) product B) ratio C) sum D) difference
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($/day)$225$250$290$400$600 Suppose the government decides to auction 6 permits. The government conducts the auction by starting at a price of $1 and asking how many permits each firm wants to buy at that price. If the total is more than 6, it raises the price by $1 and asks again until the total quantity demanded falls to 6. Under this system, each permit will sell for ________ with Industrio buying ________ and Capitalista buying ________. A. $51; 4; 2 B. $31; 2; 4 C. $101; 3; 3 D. $41; 4; 2
The equilibrium price and quantity in Figure 3.2 are, respectively,
Figure 3.2 Supply and Demand
A. $12 and 20 units. B. $12 and 40 units. C. $6 and 20 units. D. $9 and 30 units.
Which of the following is not assumed to be constant along a money demand curve?
a. The price level b. The interest rate c. Real GDP d. Nominal GDP e. Individual's tastes and preferences