What incentive does price cap regulation attempt to give the firm? How does it give the firm this incentive?
What will be an ideal response?
Price cap regulation is intended to motivate the firm to operate efficiently and keep its costs under control. It does so setting the maximum price the company can charge and then allowing the firm to keep part (or perhaps all) of any economic profit it can make if it cuts its costs.
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Suppose the tax amount on the first $10,000 income is $0; $2000 on the next $20,000; $4000 on the next $20,000; $6000 on the next $30,000; and 40 percent on any income over $80,000. Family A has income of $30,000 and Family B has income of $80,000 What is the marginal and average tax rate for each family?
A) Family A: marginal—10 percent; average—6.7 percent; Family B: marginal—30 percent; average—15 percent. B) Family A: marginal—10 percent; average—20 percent; Family B: marginal—30 percent; average—23 percent. C) Family A: marginal—10 percent; average—10 percent; Family B: marginal—40 percent; average—40 percent. D) Family A: marginal—10 percent; average—15 percent; Family B: marginal—40 percent; average—20 percent.
If marginal cost is constant, what happens to a market if it alters from perfect competition to monopoly without any change in the position of the market demand curve or any variation in costs?
A) Consumer surplus increases, and the previously existing deadweight loss decreases. B) Consumer surplus increases, and the previously existing deadweight loss increases. C) Consumer surplus is eliminated, and an equal-sized deadweight loss is created. D) Consumer surplus decreases in size, and a deadweight loss is created.
Which of the following is likely to occur when there is a substantial increase in the market demand for coffee? a. The wages of workers employed in coffee plantations will fall
b. The price of 10-gram coffee sachets will decrease. c. The demand curve for coffee plantation workers will shift to the right. d. The demand curve for coffee plantation workers will become horizontal.
Economists measure a market's domination by a small number of firms with a statistic called the