The figure above shows the market for tickets to the Super Bowl the day of the game. Suppose the government imposes an entertainment tax of $100 per ticket
a) What is the equilibrium price of a Super Bowl ticket before the tax? What is the price paid by buyers after the tax? What is the price received by sellers after the tax? b) What is the equilibrium quantity of tickets before the tax? What is the equilibrium quantity after the tax? c) Do buyers or sellers bear the largest incidence of the tax?
a) The equilibrium price before the tax is $200 for a ticket. After the tax, buyers still pay $200 per ticket. Sellers, however, receive only $100 (= $200 price paid by a buyer minus the $100 tax) per ticket.
b) Before the tax, the equilibrium quantity was 80,000 tickets. After the tax the quantity is still 80,000 tickets.
c) Sellers pay all the tax and buyers pay none of the tax. In other words, the price that a buyer pays does not change—it remains equal to $200. Hence buyers pay none of the tax. However, the price received by sellers falls from $200 per ticket to $100. Hence sellers pay the full amount of the $100 tax, which was to be expected because the supply of tickets is perfectly inelastic.
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In the United States, corporate profits are taxed
A) at both the corporate level and when investors receive dividends. B) only when investors receive dividends. C) only at the corporate level. D) neither at the corporate level nor when investors receive dividends.
Darius lent Alejandro $1,000 for one year with the understanding that Alejandro would repay $1,070 . If the actual inflation rate was 7 percent, what was the real rate of interest Darius received?
a. 14 percent b. 7 percent c. 4 percent d. 0 percent e. -7 percent
FancyFoods belongs to the Restaurant Trade Association. One of the services that the trade association provides is monthly data on total regional sales of restaurants. In designing a bonus system for employees, this service:
A. may deceive the owners from knowing what is actually happening in the region. B. may provide low-cost information for performance contracts. C. would not be useful because it is too expensive. D. would not provide useful information for performance-based contracts.
Which of the following statements is false?
A. The short run refers to a period of less than one year B. In the long run, all inputs can vary C. Firms may continue operating at a loss in the short run D. In the long run, firms would not continue operating at a loss