Setting taxes equal to marginal external costs are modeled by creating a new social cost curve that is
A. higher than the original demand curve.
B. lower than the original supply curve.
C. lower than the original demand curve.
D. higher than the original supply curve.
Answer: D
You might also like to view...
As an agent of economic development, in what areas do NGOs have a comparative advantage, compared to governments or markets?
What will be an ideal response?
Travelers driving through Gotham City can use a freeway or the Cross Town Tollway to get through the city. The tollway charges $1.00 per car during the morning rush hour (6-9 AM) and the afternoon rush hour (4-7 PM), and the toll is $0
40 per car at all other times. The weekly demand for using the tollway during rush hour is Q1 = 800 - 200P1 where quantity demanded is measured in thousands of cars, and the weekly demand for the non-rush hour period is Q2 = 2000 - 1000P2. Gotham City's marginal cost of operating the tollway is MC = 0.02 + 0.001Q per car. a. What are the marginal revenue curves associated with the two demand curves? b. Has the city set the profit maximizing tolls for the Cross Town Tollway? If not, do the current tolls generate too much or too little traffic on the tollway?
In the short run, an expansionary monetary policy by the Fed would:
a. reduce unemployment at the cost of higher inflation. b. reduce inflation at the cost of a rise in the natural rate of unemployment. c. reduce inflation and leave the natural unemployment rate unchanged. d. reduce both inflation and unemployment. e. increase both inflation and unemployment.
The deadweight loss from a tax is the reduction in producer and consumer surplus minus the tax revenue transferred to the government
a. True b. False Indicate whether the statement is true or false